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Trade, globalization and the financial crisis


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  • Mark A. Wynne
  • Erasmus K. Kersting


The financial crisis that began in August 2007 and intensified in the fall of 2008 pushed the global economy into a severe downturn that some have called the Great Recession. The decline in trade and the protectionist instincts that invariably come to the fore in difficult economic times have raised concerns that today's crisis may lead to deglobalization. ; We will illustrate the crisis' impact on world trade and examine the typical patterns of international trade over the business cycle. We urge caution in using trade data to estimate the extent of globalization or deglobalization. And we present evidence that international trade has fallen by more than expected given the course of the current business cycle. ; This raises the question of what might have accounted for the excess decline. We look at two possibilities: first, a direct effect on trade flows associated with a drying up of trade finance at the height of the crisis; second, a breakout of protectionist measures. We conclude that trade finance is the most likely explanation. However, it's vitally important to remain vigilant to the risks of protectionism.

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Bibliographic Info

Article provided by Federal Reserve Bank of Dallas in its journal Economic Letter.

Volume (Year): 4 (2009)
Issue (Month): nov ()

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Handle: RePEc:fip:feddel:y:2009:i:nov:n:v.4no.8

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Keywords: Financial crises ; Recessions ; Business cycles ; Globalization ; International trade ; Trade credit;


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Cited by:
  1. repec:pdn:wpaper:72 is not listed on IDEAS
  2. Zhichao Guo & Yuanhua Feng & Xiangyong Tan, 2010. "Short- and long-term impact of remarkable economic events on the growth causes of China-Germany trade in agri-food products," Working Papers CIE 32, University of Paderborn, CIE Center for International Economics.
  3. Zhichao Guo & Yuanhua Feng & Thomas Gries, 2013. "Changes of China's agri-food exports to Germany caused by its accession to WTO and the 2008 financial crisis," Working Papers CIE 72, University of Paderborn, CIE Center for International Economics.


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