The global financial crisis: trying to understand the global trade downturn and recovery
AbstractThis paper aims to shed light on why the downturn in global trade during the intensification of the financial crisis in 2008Q4-2009Q1 was so severe and synchronized across the world, and also examines the subsequent recovery in global trade during 2009Q2-2010Q1. The paper finds that a structural imports function which captures the different and time-varying importintensities of the components of total final expenditure can explain the sharp decline in global imports of goods and services. By contrast, a specification based on aggregate total expenditure can not fully capture the global trade downturn. In particular, panel estimates for a large number of OECD countries suggest that the high import-intensity of exports at the country-level can explain a significant proportion of the decline in world imports during the crisis, while declines in the highly import-intensive expenditure category of investment also contributed to the remaining fall in global trade. At the same time, the high and rising import-intensity of exports also reflects and captures the rapid growth in “vertical specialisation”, suggesting that widespread global production chains may have amplified the downturn in world trade and partly explains its high-degree of synchronisation across the globe. In addition, the estimates find that stockbuilding, business confidence and credit conditions also played a role in the global trade downturn. Meanwhile, the global trade recovery (2009Q2-2010Q1) can only be partially explained by differential elasticities for the components of demand (although the results confirm that the upturn in OECD imports was also driven by strong export growth and the associated reactivation of global production chains, as well as the recovery in stockbuilding and the fiscal stimulus). This may be due in part to the many policy measures that were implemented to boost global trade at that time and which can not be captured by the specification. JEL Classification: E0, F01, F10, F15, F17
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1370.
Date of creation: Aug 2011
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
- F01 - International Economics - - General - - - Global Outlook
- F10 - International Economics - - Trade - - - General
- F15 - International Economics - - Trade - - - Economic Integration
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Calista Cheung & Stéphanie Guichard, 2009. "Understanding the World Trade Collapse," OECD Economics Department Working Papers 729, OECD Publishing.
- Bricongne, J-C. & Fontagné, L. & Gaulier, G. & Taglioni, D. & Vicard, V., 2009.
"Firms and the global crisis: French exports in the turmoil,"
265, Banque de France.
- Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
- 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 1245, European Central Bank.
- R. Anderton & M. Desai, 1988. "Modelling Manufacturing Imports," National Institute Economic Review, National Institute of Economic and Social Research, vol. 123(1), pages 80-86, February.
- Landesmann, M. & Snell, A., 1988.
"The Consequences Of Mrs Thatcher For Uk Manufacturing Exports,"
Cambridge Working Papers in Economics
883, Faculty of Economics, University of Cambridge.
- Landesmann, Michael & Snell, Andrew, 1989. "The Consequences of Mrs. Thatcher for U.K. Manufacturing Exports," Economic Journal, Royal Economic Society, vol. 99(394), pages 1-27, March.
- Amador, João & Cabral, Sónia, 2008.
"Vertical specialization across the world: a relative measure,"
9618, University Library of Munich, Germany.
- Amador, João & Cabral, Sónia, 2009. "Vertical specialization across the world: A relative measure," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 267-280, December.
- João Amador & Sónia Cabral, 2008. "Vertical Specialization Across the World: A Relative Measure," Working Papers w200810, Banco de Portugal, Economics and Research Department.
- Nigel Pain & Annabelle Mourougane & Franck Sédillot & Laurence Le Fouler, 2005. "The New OECD International Trade Model," OECD Economics Department Working Papers 440, OECD Publishing.
- Sébastien Miroudot & Alexandros Ragoussis, 2009. "Vertical Trade, Trade Costs and FDI," OECD Trade Policy Papers 89, OECD Publishing.
- Davin Chor & Kalina Manova, 2010.
"Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis,"
08-2010, Singapore Management University, School of Economics.
- 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.
- Davin Chor & Kalina Manova, 2010. "Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis," NBER Working Papers 16174, National Bureau of Economic Research, Inc.
- Luca Agnello & Jacopo Cimadomo, 2012.
"Discretionary Fiscal Policies over the Cycle: New Evidence Based on the ESCB Disaggregated Approach,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 8(2), pages 43-85, June.
- Agnello, Luca & Cimadomo, Jacopo, 2009. "Discretionary Fiscal Policies over the Cycle: New Evidence based on the ESCB Disaggregated Approach," Working Paper Series 1118, European Central Bank.
- Bussière, Matthieu & Chudik, Alexander & Sestieri, Giulia, 2009.
"Modelling global trade flows: results from a GVAR model,"
Working Paper Series
1087, European Central Bank.
- 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.
- Di Mauro,Filippo & Anderton,Robert (ed.), 2007. "The External Dimension of the Euro Area," Cambridge Books, Cambridge University Press, number 9780521867009, November.
- Agnès Bénassy-Quéré & Yvan Decreux & Lionel Fontagné & David Khoudour-Castéras, 2009. "Economic Crisis and Global Supply Chains," Working Papers 2009-15, CEPII research center.
- David Haugh & Annabelle Mourougane & Olivier Chatal, 2010. "The Automobile Industry in and Beyond the Crisis," OECD Economics Department Working Papers 745, OECD Publishing.
- Jos Jansen & Ad Stokman, 2011. "International Business Cycle Comovement: Trade and Foreign Direct Investment," DNB Working Papers 319, Netherlands Central Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.