IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/5134.html
   My bibliography  Save this paper

The potential impact of the global financial crisis on world trade

Author

Listed:
  • McKibbin, Warwick J.
  • Stoeckel, Andrew

Abstract

This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households and international investors in a global economic model. The model has six sectors of production and trade in 15 major economies and regions. The paper shows that the shocks observed in financial markets can be used to generate the severe economic contraction in global trade and production experienced in 2009. In particular the distinction between the production and trade of durable and non durable goods plays a key role in explaining the much larger contraction in trade than GDP experienced by most economies. The paper explores the implications of the large increase in fiscal deficits and the implications of a global trade war in response to the financial crisis.

Suggested Citation

  • McKibbin, Warwick J. & Stoeckel, Andrew, 2009. "The potential impact of the global financial crisis on world trade," Policy Research Working Paper Series 5134, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5134
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/11/18/000158349_20091118083139/Rendered/PDF/WPS5134.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    2. Henderson, Dale W. & McKibbin, Warwick J., 1993. "A comparison of some basic monetary policy regimes for open economies: implications of different degrees of instrument adjustment and wage persistence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 221-317, December.
    3. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011. "When Is the Government Spending Multiplier Large?," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 78-121.
    4. John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
    5. McKibbin, Warwick J. & Pearce, David & Stegman, Alison, 2007. "Long term projections of carbon emissions," International Journal of Forecasting, Elsevier, vol. 23(4), pages 637-653.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010. "International supply chains and trade elasticity in times of global crisis," WTO Staff Working Papers ERSD-2010-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. Warwick J. McKibbin & Andrew Stoeckel, 2009. "Modelling the global financial crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(4), pages 581-607, Winter.
    3. Vincent Chatellier & Thierry Pouch, 2021. "Agri-food trade in the EU and France between 2000 and 2020 [Le commerce agroalimentaire de l'UE-27 et de la France entre 2000 et 2020]," Post-Print hal-03514990, HAL.
    4. Natalya Ketenci, 2014. "Trade Elasticities, Commodity Prices, and the Global Financial Crisis," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 6(3), pages 233-256, September.
    5. Rob Gregory & Christian Henn & Brad Mcdonald & Mika Saito, 2010. "Trade And The Crisis: Protect Or Recover," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 165-181.
    6. 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.
    7. Justin Yifu Lin & Will Martin, 2010. "The financial crisis and its impacts on global agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 133-144, November.
    8. World Bank & International Monetary Fund, 2010. "Global Monitoring Report 2010 : The MDGs after the Crisis," World Bank Publications - Books, The World Bank Group, number 2444, December.
    9. Janine Dixon, 2017. "The Impact on Australia of Trump's 45 per cent Tariff on Chinese Imports," Economic Papers, The Economic Society of Australia, vol. 36(3), pages 266-274, September.
    10. Gary Hawke, 2011. "Financial Crises And Knowledge, Historical And Analytical," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 51(1), pages 1-21, March.
    11. Čerović Slobodan Č & Pepić Marina & Petrović Pero & Čerović Stanislav Č, 2014. "The Impact of the Global Financial Crisis on World Trade," Economic Themes, Sciendo, vol. 52(1), pages 13-32, March.
    12. Lin, Justin Yifu & Martin, William J., 2009. "The Financial Crisis and Its Impact on the Global Agricultural Landscape," 2009 Conference, August 16-22, 2009, Beijing, China 53208, International Association of Agricultural Economists.
    13. Ketenci, Natalya, 2013. "The effect of global financial crisis on trade elasticities: Evidence from BRIICS countries and Turkey," MPRA Paper 54659, University Library of Munich, Germany.
    14. Adam Cagliarini & Warwick McKibbin, 2010. "Global Relative Price Shocks: The Role of Macroeconomic Policies," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Warwick J. McKibbin & Andrew Stoeckel, 2009. "Modelling the global financial crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(4), pages 581-607, Winter.
    2. Warwick J. McKibbin & Andrew Stoeckel, 2010. "The Global Financial Crisis: Causes and Consequences," Asian Economic Papers, MIT Press, vol. 9(1), pages 54-86, Winter/Sp.
    3. Warwick McKibbin & Adele Morris & Peter Wilcoxen, 2008. "Expecting The Unexpected: Macroeconomic Volatility And Climate Policy," CAMA Working Papers 2008-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Gagnon, Marie-Hélène & Gimet, Céline, 2013. "The impacts of standard monetary and budgetary policies on liquidity and financial markets: International evidence from the credit freeze crisis," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4599-4614.
    5. Warwick McKibbin & Peter Wilcoxen, 2008. "Building On Kyoto: Towards A Realistic Global Climate Agreement," CAMA Working Papers 2008-13, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Warwick J. McKibbin & Andrew B. Stoeckel & YingYing Lu, 2014. "Global Fiscal Adjustment and Trade Rebalancing," The World Economy, Wiley Blackwell, vol. 37(7), pages 892-922, July.
    7. McCallum, Bennett T. & Nelson, Edward, 1999. "Nominal income targeting in an open-economy optimizing model," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 553-578, June.
    8. Marco Riguzzi & Philipp Wegmueller, 2017. "Economic Openness and Fiscal Multipliers," International Economic Journal, Taylor & Francis Journals, vol. 31(1), pages 1-35, January.
    9. Batini, Nicoletta & Harrison, Richard & Millard, Stephen P., 2003. "Monetary policy rules for an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11), pages 2059-2094.
    10. Mr. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," IMF Working Papers 1998/015, International Monetary Fund.
    11. Troug, Haytem, 2019. "Monetary Policy with Non-Separable Government Spending," MPRA Paper 92323, University Library of Munich, Germany.
    12. Joshua Aizenman & Yothin Jinjarak, 2011. "The Fiscal Stimulus of 2009-10: Trade Openness, Fiscal Space and Exchange Rate Adjustment," NBER Working Papers 17427, National Bureau of Economic Research, Inc.
    13. Fritz Breuss, 2009. "Finanzmarktkrise als Phänomen des Überschießens auf den Aktienmärkten. Eine theoretische Analyse," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(12), pages 933-941, December.
    14. Warwick McKibbin & Peter Wilcoxen & Wing Thye Woo, 2008. "China Can Grow And Still Help Prevent The Tragedy Of The Co2 Commons," CAMA Working Papers 2008-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    15. McKibbin, Warwick J. & Tan, Kang Yong, 2009. "Learning and international transmission of shocks," Economic Modelling, Elsevier, vol. 26(5), pages 1033-1052, September.
    16. Roshen Fernando, 2020. "Global impact of loss of confidence in Asian emerging markets," The World Economy, Wiley Blackwell, vol. 43(7), pages 1907-1927, July.
    17. Haytem Troug, 2020. "Monetary policy with non-separable government spending," Journal of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 426-449, January.
    18. Joshua Aizenman & Yothin Jinjarak, 2012. "The Fiscal Stimulus of 2009-2010: Trade Openness, Fiscal Space, and Exchange Rate Adjustment," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 301-342.

    More about this item

    Keywords

    Economic Theory&Research; Debt Markets; Emerging Markets; Banks&Banking Reform; Labor Policies;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5134. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.