Interest Rates and World Trade: An “Austrian” Perspective

This paper develops a framework linking interest rates and international trade through an explicit treatment of production time and production length, drawing on ideas from the Austrian economics tradition of Böhm-Bawerk. Antràs analyzes how changes in interest rates influence labor productivity, production processes, export costs, and firms’ participation in trade. The paper decomposes the effects of interest rate changes on global trade volumes into several channels, including productivity effects, consumption responses, time-related trade cost effects, and exporter selection dynamics. The study contributes to understanding the macroeconomic and financial determinants of international trade integration.