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The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun

  • Andrei A. Levchenko

    (University of Michigan)

  • Logan Lewis

    (University of Michigan)

  • Linda L. Tesar

    (University of Michigan and National Bureau of Economic Research)

One of the most striking aspects of the recent recession is the collapse in international trade. This paper uses disaggregated quarterly and monthly data on U.S. imports and exports to shed light on the anatomy of this collapse. We find that the recent reduction in trade relative to overall economic activity is far larger than in previous downturns. Information on quantities and prices of both domestic absorption and imports reveals a more than 50% shortfall in imports, relative to what would be predicted by a simple import demand relationship. In a sample of imports and exports disaggregated at the 6-digit NAICS level, we find that sectors used as intermediate inputs experienced significantly higher percentage reductions in both imports and exports. We also find support for compositional effects: sectors with larger reductions in domestic output had larger drops in trade. By contrast, we find no support for the hypothesis that trade credit played a role in the recent trade collapse.

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r592.pdf
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 592.

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Length: 40 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:mie:wpaper:592
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  1. Boileau, Martin, 1999. "Trade in capital goods and the volatility of net exports and the terms of trade," Journal of International Economics, Elsevier, vol. 48(2), pages 347-365, August.
  2. Sam Kortum & John Romalis & Brent Neiman & Jonathan Eaton, 2010. "Trade and the Global Recession," 2010 Meeting Papers 1340, Society for Economic Dynamics.
  3. Ariel Burstein & Christopher Kurz & Linda Tesar, 2008. "Trade, Production Sharing, and the International Transmission of Business Cycles," NBER Working Papers 13731, National Bureau of Economic Research, Inc.
  4. Iacovone, Leonardo & Zavacka, Veronika, 2009. "Banking crises and exports : lessons from the past," Policy Research Working Paper Series 5016, The World Bank.
  5. Freund, Caroline, 2009. "The trade response to global downturns : historical evidence," Policy Research Working Paper Series 5015, The World Bank.
  6. Kevin Cowan & Alejandro Neut, 2007. "Intermediate Goods, Institutions and Output per Worker," Working Papers Central Bank of Chile 420, Central Bank of Chile.
  7. Engel, Charles & Wang, Jian, 2011. "International trade in durable goods: Understanding volatility, cyclicality, and elasticities," Journal of International Economics, Elsevier, vol. 83(1), pages 37-52, January.
  8. Vasco Carvalho, 2007. "Aggregate fluctuations and the network structure of intersectoral trade," Economics Working Papers 1206, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2010.
  9. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
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