International trade flows across the Business cycle

By using OLS-type regressions on monthly import data between 2004 and 2009 from four major European economies, this thesis will analyze the determinants of international trade flows, based on cross-country differences and changes within countries. Additionally, the behavior of international trade flows over different stages of the business cycle depending on the wage level and the risk profile of countries will be analyzed. Results show that lower wage levels and higher risk ratings (lower actual risks) are generally beneficial to the share of trade that countries manage to capture. Further results show that international trade goes together with higher wages within countries, independently from the business cycle, but that the business cycle does affect the valuation of risks, because countries with lower risk ratings (higher actual risks) capture lower trade shares during a contraction period of the economy.