Analysis of aggregate shocks on international trade volume with heterogeneous firms in granular setting

Presence of large firm and granular structure of firms engaging in international trade has been one of the interesting trends in models of international trade for last five years. Solving international trade models now focuses more on large firms and the volatility caused by realization of a shock to these firms. The effect of shocks that affect a large firm and create aggregate volatility have been reviewed before. In this thesis, the effect of a shock on operating firms in a market that consist of large number of firms, which their sale sizes follow a power function, is analyzed in model with heterogeneous firms. The effect of this shock on price index and aggregate productivity is considered and it can catch some features of data on international trade. Results can explain the change in amount of trade in goods internationally while a shock is only realized by firms operating in a single country. Quantitative evaluation can show that the effect of this shock is higher for middle size countries and lower for small and large countries in the case that the reference country is the largest one in terms of economy size.