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Global trade finance, trade collapse and trade slowdown: a Granger causality analysis

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  • van Bergeijk, P.A.G.
  • Dao, T.K.

Abstract

This research paper provides a causality assessment on the linkage between declines in world trade finance and the world trade collapse in the period following the Financial Crisis of 2008 and 2009 as well as the ensuing global trade slowdown. The paper performs Granger Causality tests on two time series: World trade (volume data acquired from the CPB World Trade Monitor) and World trade finance (transaction data acquired from SWIFT), using global monthly data from January 2007 to May 2017. In the short run, Granger causality always runs one-way from world trade finance to world trade. We always find two-way Granger causality for lags longer than two years. Importantly Granger causality never runs one-way from world trade to world trade finance. Given the short-term nature of trade finance, we conclude that world trade finance Granger-causes world trade.

Suggested Citation

  • van Bergeijk, P.A.G. & Dao, T.K., 2018. "Global trade finance, trade collapse and trade slowdown: a Granger causality analysis," ISS Working Papers - General Series 634, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    • Handle: RePEc:ems:euriss:104224
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    More about this item

    Keywords

    world trade; world trade collapse; world trade slow-down; trade finance; Granger causality; financial crisis; SWIFT;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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