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The Collapse of International Trade during the 2008–09 Crisis: In Search of the Smoking Gun

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Author Info

  • Andrei A Levchenko
  • Logan T Lewis
  • Linda L Tesar

Abstract

One of the most striking aspects of the recent recession is the collapse in international trade. This paper uses disaggregated data on U.S. imports and exports to shed light on the anatomy of this collapse. The paper finds that the recent reduction in trade relative to overall economic activity is far larger than in previous downturns. Information on quantities and prices of both domestic absorption and imports reveals a 40 percent shortfall in imports, relative to what would be predicted by a simple import demand relationship. In a sample of imports and exports disaggregated at the 6-digit NAICS level, the paper finds that sectors used as intermediate inputs experienced significantly higher percentage reductions in both imports and exports. It also finds support for compositional effects: sectors with larger reductions in domestic output had larger drops in trade. By contrast, the paper finds no support for the hypothesis that trade credit played a role in the recent trade collapse.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Economic Review.

Volume (Year): 58 (2010)
Issue (Month): 2 (December)
Pages: 214-253

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Handle: RePEc:pal:imfecr:v:58:y:2010:i:2:p:214-253

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Citations

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Cited by:
  1. Nikolaos Antonakakis, 2012. "The Great Synchronization of International Trade Collapse," Department of Economics Working Papers wuwp142, Vienna University of Economics, Department of Economics.
  2. Hollweg, Claire H. & Lederman, Daniel & Reyes, Jose-Daniel, 2012. "Monitoring export vulnerability to changes in growth rates of major global markets," Policy Research Working Paper Series 6266, The World Bank.
  3. Matthieu Bussière & Alexander Chudik & Giulia Sestieri, 2012. "Modelling global trade flows: results from a GVAR model," Globalization and Monetary Policy Institute Working Paper 119, Federal Reserve Bank of Dallas.
  4. Nicola Cetorelli & Linda S. Goldberg, 2010. "Global Banks and International Shock Transmission: Evidence from the Crisis," NBER Working Papers 15974, National Bureau of Economic Research, Inc.
  5. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
  6. Youssouf Kiendrebeogo, 2013. "How Do Banking Crises Affect Bilateral Exports?," IMF Working Papers 13/150, International Monetary Fund.
  7. Rudiger Ahrend & Antoine Goujard, 2012. "International Capital Mobility and Financial Fragility - Part 6. Are all Forms of Financial Integration Equally Risky in Times of Financial Turmoil?: Asset Price Contagion During the Global Financial ," OECD Economics Department Working Papers 969, OECD Publishing.
  8. Jan Fidrmuc & Jarko Fidrmuc, 2009. "Foreign Languages and Trade," CEDI Discussion Paper Series 09-03, Centre for Economic Development and Institutions(CEDI), Brunel University.
  9. Bradley J. McDonald & Christian Henn, 2011. "Protectionist Responses to the Crisis," IMF Working Papers 11/139, International Monetary Fund.
  10. Lewis, Logan T., 2014. "Menu Costs, Trade Flows, and Exchange Rate Volatility," International Finance Discussion Papers 1102, Board of Governors of the Federal Reserve System (U.S.).

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