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Trade Booms, Trade Busts, and Trade Costs

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Author Info
David S. Jacks ()
Christopher M. Meissner ()
Dennis Novy ()

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Abstract

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2767.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2767

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F15 - International Economics - - Trade - - - Economic Integration
N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative
N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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This page was last updated on 2009-11-3.

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