Abstract: This paper shows that inventories buffer the transmission of shocks through domestic and international production networks. Using sectoral trade and production data, I demonstrate that increased upstream and downstream linkages in production networks intensify shock propagation, while inventory holdings mitigate these effects. I develop a multi-country, multi-sector international real business cycle model that integrates inventory investment, production networks, and sector-level productivity shocks. I show that the model is consistent with empirical evidence on the amplifying effects of production networks and the dampening effects of inventory holdings. Furthermore, incorporating inventory investment enhances the model's ability to accurately capture production comovement, volatility, and cyclicality across countries and sectors.

Abstract: We disentangle the intertwined roles of sales adjustment frictions and production adjustment frictions. We develop a dynamic general equilibrium heterogeneous firm model of international trade to study labor dynamics and export dynamics jointly. To export, heterogeneous plants pay sunk costs as well as variable trade costs, which depend on the history of exporting status. Plants' employment decisions are subject to convex and non-convex labor adjustment costs. Matching the model to the salient features on employment, sales and exports in Colombian plant-level data, we recover measures of a range of export and labor adjustment frictions. We relate these measures to those from models that abstract from either export frictions or labor adjustment frictions. We find that both export frictions and labor adjustment costs are essential for capturing the labor growth distribution, labor dynamics, churnings in export market, and labor growth premiums around the export margin.

Abstract: Recent studies on the U.S.-China trade dispute suggest that the increases in U.S. import tariffs were completely borne by U.S. importers. However, using firm-level data from the U.S. Census, we find that tariff pass-through is incomplete for firms that continue importing the same product from the same country. Large importers experience higher pass-through and account for a greater share of import. Firms that import new products or source from different countries pay higher prices than those maintaining existing relationships. Thus, the observed complete pass-through in prior studies reflects import reallocation toward firms with higher pass-through or more costly new supplier relationships. To explain these patterns, we incorporate a firm-specific import price with two-sided market power into a standard importer model. We show that fixed import costs, an elastic foreign export supply, and the greater bargaining power of large U.S. importers help account for the empirical findings.