The Impact of Financial Crises on Trade Flows: A Developing Country Perspective
AbstractThe global financial crisis has hit hard international trade that dropped below levels not seen since the Great Depression with disastrous consequences for the developing world. This paper estimates an extended gravity model of trade on a sample of 83 developing countries over the period 1990-2007 to shed light on how banking crises and global economic downturns affect bilateral exports flows from developing countries. In addition to traditional variables, we include a trade finance variable and foreign aid among the regressors. Differences between developing regions are taken into account. Our results show that (i) trade finance has a positive and significant impact on bilateral export flows in all developing regions except Latin America; (ii) foreign aid matters in all regions; (iii) global economic downturns exert a negative and significant impact on export flows in all developing countries, and especially in Latin American and Sub-Saharan African economies; (iv) banking crises appear to have no significant impact in most regions.
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Bibliographic InfoPaper provided by Agricultural Economics Society in its series 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland with number 91831.
Date of creation: 29 Mar 2010
Date of revision:
Banking Crises; Developing Countries; Foreign Aid; Global Downturn; International Trade; Trade Finance; Mixed Effects Panel Data; Random Coefficients.; Agricultural and Food Policy; C23; F11; F12; F34; F35; G01.;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F35 - International Economics - - International Finance - - - Foreign Aid
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-IFN-2010-07-17 (International Finance)
- NEP-INT-2010-07-17 (International Trade)
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