Advanced Search
MyIDEAS: Login to save this paper or follow this series

Direct and Indirect Crisis Effects on International Trade or: Is There a Chance to Employ an Income Stimulus to Stimulate Exports?

Contents:

Author Info

  • Konon, Alexander
Registered author(s):

    Abstract

    While research concerning the fundamental connection between financial crises and international trade, at first appearance, provides conclusive results, it displays two specific methodological biases by ignoring income effects: first, crisis influence is underestimated; second, crisis dynamics do not take account of income dynamics, thereby giving the analysis a touch of avoidable incompleteness. This paper offers a solution to both problems without leaving the standard framework of the gravity model of trade. The solution is brought by a basic crisis adjustment technique of income. As an empirical test, the developed approach is employed to estimate the crisis response of German trade during the recent global crisis. Results correspond to consequences deducted from an elementary impact model for a quasi-non-crisis country: exports are mainly affected by non-income effects and foreign income effects; imports are influenced by domestic income and global non-income effects, and reveal expected dynamics. The outcome has two implications of interest for policy decisions: (i) stimulus spillovers can come back, and (ii) the indirect effect sensitivity of imports delivers a strong case for an international coordination of fiscal measures.

    Download Info

    If 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.
    File URL: http://mpra.ub.uni-muenchen.de/36363/
    File Function: original version
    Download Restriction: no

    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36363.

    as in new window
    Length:
    Date of creation: 02 Feb 2012
    Date of revision:
    Handle: RePEc:pra:mprapa:36363

    Contact details of provider:
    Postal: Schackstr. 4, D-80539 Munich, Germany
    Phone: +49-(0)89-2180-2219
    Fax: +49-(0)89-2180-3900
    Web page: http://mpra.ub.uni-muenchen.de
    More information through EDIRC

    Related research

    Keywords: gravity model of trade; German trade; crisis impact; income effects; stimulus effects;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    3. Russell Cooper & Hubert Kempf & Dan Peled, 2009. "Insulation impossible: fiscal spillovers in a monetary union," Globalization and Monetary Policy Institute Working Paper 30, Federal Reserve Bank of Dallas.
    4. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
    5. Georg Quaas & Mathias Klein, 2011. "Struktureller Wandel und Krisenbewältigung der deutschen Volkswirtschaft," Wirtschaftsdienst, Springer, vol. 91(3), pages 186-193, March.
    6. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
    7. Beetsma, Roel & Giuliodori, Massimo & Klaassen, Franc, 2005. "Trade Spillovers of Fiscal Policy in the European Union: A Panel Analysis," CEPR Discussion Papers 5222, C.E.P.R. Discussion Papers.
    8. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
    9. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
    10. Taimur Baig & Ilan Goldfajn, 1998. "Financial Market Contagion in the Asian Crisis," IMF Working Papers 98/155, International Monetary Fund.
    11. Reuven Glick & Andrew K. Rose, 1998. "Contagion and trade: why are currency crises regional?," Pacific Basin Working Paper Series 98-03, Federal Reserve Bank of San Francisco.
    12. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
    13. James Feyrer, 2009. "Distance, Trade, and Income – The 1967 to 1975 Closing of the Suez Canal as a Natural Experiment," NBER Working Papers 15557, National Bureau of Economic Research, Inc.
    14. Kristin Forbes, 2000. "The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally," NBER Working Papers 7807, National Bureau of Economic Research, Inc.
    15. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises," IMF Working Papers 10/146, International Monetary Fund.
    16. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    17. Thomas William Dorsey & Mika Saito & Armine Khachatryan & Irena Asmundson & Ioana Niculcea, 2011. "Trade and Trade Finance in the 2008-20+L460609 Financial Crisis," IMF Working Papers 11/16, International Monetary Fund.
    18. Abdul Abiad & Petia Topalova & Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 11/3, International Monetary Fund.
    19. Heike Belitz & Marius Clemens & Martin Gornig, 2009. "Germany's Technological Specialization Assures Growth Opportunities," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(16), pages 108-113.
    20. Paul R. Masson, 1998. "Contagion," IMF Working Papers 98/142, International Monetary Fund.
    21. Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussão 400, Department of Economics PUC-Rio (Brazil).
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36363. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.