Import protection, business cycles, and exchange rates : evidence from the great recession
AbstractThis research estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1-2010:Q4 for five industrialized economies -- the United States, European Union, Australia, Canada and South Korea. There is evidence of a strong countercyclical trade policy response in the pre-Great Recession period of 1988:Q1-2008:Q3 during which increases in domestic unemployment rates, real appreciations in bilateral exchange rates, and declines in the GDP growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers. It then applies this pre-Great Recession empirical model to realized macroeconomic data from 2008:Q4-2010:Q4 and find it predicts a surge of new import protection during the Great Recession -- e.g., for the US and EU, the model predicts new trade barriers would cover an additional 15 percentage points of nonoil imports, well above the baseline level of 2-3 percent of import coverage immediately preceding the crisis. Finally, the research examines why the realized trade policy response differed from model predictions. While exchange rate movements played an important role in limiting new import protection during the Great Recession, there is also evidence of one particularly important change in trade policy responsiveness; i.e., in this period, governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6038.
Date of creation: 01 Apr 2012
Date of revision:
Currencies and Exchange Rates; Economic Theory&Research; Free Trade; Trade Law; Trade Policy;
Other versions of this item:
- Bown, Chad P. & Crowley, Meredith A., 2013. "Import protection, business cycles, and exchange rates: Evidence from the Great Recession," Journal of International Economics, Elsevier, vol. 90(1), pages 50-64.
- Chad Bown & Meredith Crowley, 2011. "Import protection, business cycles, and exchange rates: evidence from the Great Recession," Working Paper Series WP-2011-16, Federal Reserve Bank of Chicago.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
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.:
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- Feinberg, Robert M, 1989. "Exchange Rates and "Unfair Trade."," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 704-07, November.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Great Recession and Trade Protectionism: What Went Right?
by Edward Alden in Renewing America on 2012-05-01 18:47:40
- Chad P. Bown, 2004.
"How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel,"
Econometric Society 2004 North American Summer Meetings
434, Econometric Society.
- Chad Bown, 2013. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Review of Industrial Organization, Springer, vol. 42(4), pages 449-481, June.
- Bown, Chad P., 2013. "How different are safeguards from antidumping ? evidence from us trade policies toward steel," Policy Research Working Paper Series 6378, The World Bank.
- Auboin, Marc & Ruta, Michele, 2013.
"The relationship between exchange rates and international trade: a literature review,"
World Trade Review,
Cambridge University Press, vol. 12(03), pages 577-605, July.
- Marc Auboin & Michele Ruta, 2012. "The Relationship between Exchange Rates and International Trade: A Literature Review," CESifo Working Paper Series 3868, CESifo Group Munich.
- Bown, Chad P., 2013. "Trade policy flexibilities and Turkey : tariffs, antidumping, safeguards, and WTO dispute settlement," Policy Research Working Paper Series 6322, The World Bank.
- Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2013.
"The Great Trade Collapse,"
Annual Review of Economics,
Annual Reviews, vol. 5(1), pages 375-400, 05.
- Chad Bown & Meredith Crowley, 2013.
"Emerging economies, trade policy, and macroeconomic shock,"
Working Paper Series
WP-2012-18, Federal Reserve Bank of Chicago.
- Bown, Chad P. & Crowley, Meredith A., 2013. "Emerging economies, trade policy, and macroeconomic shocks," Policy Research Working Paper Series 6315, The World Bank.
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