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Trade Crisis? What Trade Crisis?

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  • Kristian Behrens
  • Gregory Corcos
  • Giordano Mion

Abstract

We provide an analysis of the 2008-2009 trade collapse using microdata from a small open economy, Belgium. First, we find that changes in firm-country-product exports and imports occurred mostly at the intensive margin: the number of firms, the average number of destination and origin markets per firm, and the average number of products per market changed only very little. Second, econometric analysis reveals some composition effects in the intensive margin fall along firm, product and country characteristics. The most important factor explaining changes in exports is the destination country's growth rate of GDP. Had growth rates in 2008{2009 been the same as in 2007{2008, Belgian exports would have fallen by about 57% less than what we observe. Trade in consumer durables and capital goods fell more severely than trade in other product categories, which explains another 22% of the observed fall. Financial variables and involvement in global value chains have some explanatory power on the exports and imports fall respectively, but appear to have affected domestic operations in equal proportion. More generally, exports-to-turnover and imports-to-intermediates ratios at the firm level did neither systematically decrease nor reveal strong firm- or sector-specific patterns. Overall, our results point to a demand-side explanation: the fall in trade was mostly driven by the fall in economic activity. It is not a trade crisis | just a trade collapse.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0995.

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Date of creation: Aug 2010
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Handle: RePEc:cep:cepdps:dp0995

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: trade crisis; trade collapse; margins of trade; firm-level analysis; Belgium.;

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References

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  1. Iacovone, Leonardo & Zavacka, Veronika, 2009. "Banking crises and exports : lessons from the past," Policy Research Working Paper Series 5016, The World 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.
  3. Andrei A. Levchenko & Logan T. Lewis & Linda L. Tesar, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," NBER Working Papers 16006, National Bureau of Economic Research, Inc.
  4. Nicolas Berman and Philippe Martin, 2010. "The Vulnerability Of Sub-Saharan Africa To The Financial Crisis: The Case Of Trade," RSCAS Working Papers, European University Institute 2010/15, European University Institute.
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  9. 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, European Central Bank 1245, European Central Bank.
  10. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market entry costs, producer heterogeneity and export dynamics," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers, Indian Statistical Institute, New Delhi, India 03-10, Indian Statistical Institute, New Delhi, India.
  11. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The great trade collapse of 2008-2009: an inventory adjustment?," Working Papers 10-18, Federal Reserve Bank of Philadelphia.
  12. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 545-64, September.
  13. Araújo, Sónia & Oliveira Martins, Joaquim, 2011. "The Great Synchronisation : tracking the trade collapse with high-frequency data," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/8088, Paris Dauphine University.
  14. Amiti, Mary & Weinstein, David E., 2009. "Exports and Financial Shocks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7590, C.E.P.R. Discussion Papers.
  15. Davin Chor & Kalina Manova, 2010. "Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis," Working Papers, Singapore Management University, School of Economics 08-2010, Singapore Management University, School of Economics.
  16. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," NBER Working Papers 16059, National Bureau of Economic Research, Inc.
  17. Freund, Caroline, 2009. "The trade response to global downturns : historical evidence," Policy Research Working Paper Series 5015, The World Bank.
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