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The Collapse of Global Trade

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  • Ann Spehar

Abstract

A unique feature of the financial crisis is the unprecedented collapse in global world trade. The objective of this paper is to explain some of that collapse as a move towards protectionism triggered not by nationalistic interests but by ‘competing’ objectives among trading partners from the Mundell-Fleming Trilemma. Even with the best of intentions, efforts towards internal rebalancing necessarily imply harming your trading partner unintentionally if they should be using conflicting policy objectives of the Trilemma. National interests are at odds between two such countries, and their policy prescriptions counteract and paralyse rebalancing and coordination efforts between nations. Policymakers may be forced into protectionist stances in an effort to counteract the internal rebalancing efforts of their neighbours.

Suggested Citation

  • Ann Spehar, 2010. "The Collapse of Global Trade," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(3), pages 133-157, July.
  • Handle: RePEc:wej:wldecn:434
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    Cited by:

    1. Antonakakis, Nikolaos, 2012. "The great synchronization of international trade collapse," Economics Letters, Elsevier, vol. 117(3), pages 608-614.

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