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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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Cited by:
  1. Fidrmuc, Jan & Fidrmuc, Jarko, 2009. "Foreign Languages and Trade," CEPR Discussion Papers 7228, C.E.P.R. Discussion Papers.
  2. Nicola Cetorelli & Linda S Goldberg, 2011. "Global Banks and International Shock Transmission: Evidence from the Crisis," IMF Economic Review, Palgrave Macmillan, vol. 59(1), pages 41-76, April.
  3. Logan Lewis, 2013. "Menu Costs, Trade Flows, and Exchange Rate Volatility," 2013 Meeting Papers 313, Society for Economic Dynamics.
  4. 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.
  5. Antonakakis, Nikolaos, 2012. "The great synchronization of international trade collapse," MPRA Paper 39859, University Library of Munich, Germany.
  6. Bradley J. McDonald & Christian Henn, 2011. "Protectionist Responses to the Crisis," IMF Working Papers 11/139, 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. Youssouf Kiendrebeogo, 2013. "How Do Banking Crises Affect Bilateral Exports?," IMF Working Papers 13/150, International Monetary Fund.
  9. 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.
  10. Bussière, Matthieu & Chudik, Alexander & Sestieri, Giulia, 2009. "Modelling global trade flows: results from a GVAR model," Working Paper Series 1087, European Central Bank.

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