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The global financial crisis, LDC exports and welfare: analysis with a world trade model

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  • Willenbockel, Dirk
  • Robinson, Sherman

Abstract

Changes in international trade flows and world prices are major channels through which the global financial crisis will hit developing countries. The recession in the "global North" triggered by the financial crisis and the resulting slowdown of growth in China and other major emerging economies will generate declines in demand for exports from developing countries, along with a reversal of the beneficial terms-of-trade trends that have favoured net exporters of primary commodities over the last few years. How these trade shocks and terms-of-trade trends affect economic performance and welfare in low-income countries depends on country-specific characteristics and requires a differentiated analysis across countries. This study uses a multi-region computable general equilibrium (CGE) world trade model to gauge the impact of a slowdown in economic activity in the OECD on trade performance, world prices, and aggregate welfare in the rest of the world with a particular focus on the least developed countries (LDCs) in sub-Saharan Africa and Asia. The results of the simulation analysis indicate the degree of vulnerability of different developing countries and regions distinguished in the model to impacts arising from the recession via the trade channel.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15376.

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Date of creation: Apr 2009
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Handle: RePEc:pra:mprapa:15376

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Keywords: Global financial crisis; terms of trade; recession;

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References

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  1. Hertel, Thomas & David Hummels & Maros Ivanic & Roman Keeney, 2003. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," GTAP Working Papers 1324, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
  3. Ng, Francis & Yeats, Alexander, 2003. "Major trade trends in East Asia : what are their implications for regional cooperation and growth," Policy Research Working Paper Series 3084, The World Bank.
  4. McDonald, Scott & Robinson, Sherman & Thierfelder, Karen, 2008. "Asian Growth and Trade Poles: India, China, and East and Southeast Asia," World Development, Elsevier, vol. 36(2), pages 210-234, February.
  5. Scott McDonald & Sherman Robinson & Karen Thierfelder, 2007. "Globe: A SAM Based Global CGE Model using GTAP Data," Departmental Working Papers 14, United States Naval Academy Department of Economics.
  6. Marcus Noland & Li-Gang Liu & Sherman Robinson, 1998. "Global Economic Effects of the Asian Currency Devaluations," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa56, November.
  7. Liu, Jing & Channing Arndt & Thomas Hertel, 2003. "Parameter Estimation and Measures of Fit in A Global, General Equilibrium Model," GTAP Working Papers 1200, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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Cited by:
  1. Joseph Francois & Mario Holzner & Olga Pindyuk, 2011. "Austrian Linkages to the European Economy and the Transmission Mechanisms of Economic Crisis," FIW Research Reports series III-006, FIW.

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