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Durable goods and the collapse of global trade

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  • Jian Wang

Abstract

Global trade has experienced a stunning collapse in the current recession, with the World Trade Organization estimating a decrease of roughly 9 percent in 2009--the biggest contraction since the Second World War. The swift decline caused substantial damage to the global economy, hitting Japan and other countries with large trade sectors especially hard. It also raised concerns that the trade collapse would worsen the global recession and delay recovery. ; Several factors contributed to the global trade collapse. However, the ultimate causes are tied to the global financial crisis that started in mid-2007. Financial markets deteriorated over the next year, and the global economy's growth prospects shifted suddenly in September 2008. In the final months of the year, the forecast for 2009 gross domestic product (GDP) growth went from a moderate slowdown to a sharp contraction. ; Consumers and investors worldwide started to realize that the financial crisis' impact on real economies may be longer and more severe than they had expected. They pulled back significantly, leading to declines in total consumption and investment that spilled over into global trade. Particularly hard hit were consumer and producer purchases of long-lasting goods. We will see that demand for these durable goods played an important role in the recent global trade collapse.

Suggested Citation

  • Jian Wang, 2010. "Durable goods and the collapse of global trade," Economic Letter, Federal Reserve Bank of Dallas, vol. 5(feb).
  • Handle: RePEc:fip:feddel:y:2010:i:feb:n:v.5no.2
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    Cited by:

    1. Filippo di Mauro & Joseph W. Gruber & Bernd Schnatz & Nico Zorell, 2011. "Where are global and U.S. trade heading in the aftermath of the trade collapse: issues and alternative scenarios," International Finance Discussion Papers 1017, Board of Governors of the Federal Reserve System (U.S.).
    2. Lian An & Jian Wang, 2012. "Exchange Rate Pass-Through: Evidence Based on Vector Autoregression with Sign Restrictions," Open Economies Review, Springer, vol. 23(2), pages 359-380, April.
    3. James Koch, 2012. "Regional Economic Impacts of the World-Wide Recession: A Case Study of Hampton Roads, Virginia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(2), pages 163-176, May.
    4. Dimitra Petropoulou & Kwok Tong Soo, 2011. "Product Durability and Trade Volatility," Working Paper Series 2811, Department of Economics, University of Sussex Business School.
    5. Rudolfs Bems & Robert C Johnson & Kei-Mu Yi, 2010. "Demand Spillovers and the Collapse of Trade in the Global Recession," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 58(2), pages 295-326, December.
    6. Pablo Mejia-Reyes & Miguel Angel Diaz-Carreno, 2015. "Effects of the Great Recession on state output in Mexico," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 12(2), pages 25-45, Julio-Dic.
    7. Pablo Mejia Reyes & Miguel Angel Diaz CarreƱo, 2015. "Effects of the Great Recession on state output in Mexico," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 12(2), pages 25-45, Julio-Dic.

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