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Trade and the Global Recession

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  • Jonathan Eaton
  • Samuel Kortum
  • Brent Neiman
  • John Romalis

Abstract

Global trade fell 30 percent relative to GDP during the Great Recession of 2008-2009. Did this collapse result from factors impeding international transactions or did it simply reflect the greater severity of the recession in highly traded sectors? We answer this question with detailed international data, interpreted within a general-equilibrium trade model. Counterfactual simulations of the model show that a shift in spending away from manufactures, particularly durables, accounts for more than 80 percent of the drop in trade/GDP. Increased trade impediments reduced trade in some countries, but globally the impact of these changes largely cancels out.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16666.

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Date of creation: Jan 2011
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Handle: RePEc:nbr:nberwo:16666

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