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The Global Trade Slowdown: A Dynamic Approach

Author

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  • Carter Mix

    (University of Rochester)

  • George Alessandria

    (University of Rochester)

Abstract

Since 2012, global trade growth has slowed significantly relative to both its historical trend and output growth. There is some debate around whether this slowdown is due to cyclical or structural factors. The answer to this question has important implications for future trade growth. We develop a dynamic quantitative two-country model in which trade responds gradually to changes in trade costs. We capture cyclical and structural factors with movements in productivity and trade costs. We use Bayesian estimation to match the model with time series from the data. We then compute the contributions of cyclical and structural factors on the slowdown. Our model also offers insights on how changes in productivity and trade costs affect trade and output in different ways.

Suggested Citation

  • Carter Mix & George Alessandria, 2017. "The Global Trade Slowdown: A Dynamic Approach," 2017 Meeting Papers 907, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:907
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    References listed on IDEAS

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    Cited by:

    1. Alessandria, George & Choi, Horag & Ruhl, Kim J., 2021. "Trade adjustment dynamics and the welfare gains from trade," Journal of International Economics, Elsevier, vol. 131(C).

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