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Interpreting the world trade collapse

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  • Domit, Silvia

    ()
    (Bank of England)

  • Shakir, Tamarah

    ()
    (Bank of England)

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    Abstract

    World trade’s dramatic collapse from the end of 2008 was emblematic of a globally synchronised recession that threatened to become a depression and of a financial crisis painfully transmitted to the real economy. The extent of the fall in world trade relative to that in world GDP and the subsequent strength of the trade recovery so far suggests particular factors have been affecting global trade flows. This article considers the possible reasons for the pronounced fall and recovery in world trade relative to world GDP, focusing on UK export demand. At its core, the extraordinary decline in trade stemmed from the combination of a shock to global demand skewed towards highly tradable sectors and the ever-more globalised production process for these goods. The encouraging improvement in world trade from the second half of 2009 can also be attributed to some of these factors, as well as suggesting that permanent damage to the global marketplace may be less extensive than first feared.

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    Bibliographic Info

    Article provided by Bank of England in its journal Bank of England Quarterly Bulletin.

    Volume (Year): 50 (2010)
    Issue (Month): 3 ()
    Pages: 183-189

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    Handle: RePEc:boe:qbullt:0024

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    1. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2010. "Firms and the global crisis: French exports in the turmoil," Working Paper Series 1245, European Central Bank.
    2. Agnès Bénassy-Quéré & Yvan Decreux & Lionel Fontagné & David Khoudour-Castéras, 2009. "Economic Crisis and Global Supply Chains," Working Papers 2009-15, CEPII research center.
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    Cited by:
    1. Stratford, Kate, 2013. "Nowcasting world GDP and trade using global indicators," Bank of England Quarterly Bulletin, Bank of England, vol. 53(3), pages 233-242.
    2. Chowla, Shiv & Quaglietti, Lucia & Rachel, Lukasz, 2014. "How have world shocks affected the UK economy?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 167-179.

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