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Trade and the Global Recession

  • Jonathan Eaton
  • Samuel Kortum
  • Brent Neiman
  • John Romalis

We develop a dynamic multi-country general equilibrium model to investigate forces acting on the global economy during the Great Recession and ensuing recovery. Our multi- sector framework accounts completely for countries' trade, investment, production, and relative GDPs in terms of different sets of shocks. Applying the model to 21 countries, we investigate the 29 percent drop in world trade during 2008-2009. Declines in the efficiency of investment in durables account for most of this trade collapse. Shocks to trade frictions, productivity, and demand play minor roles. In contrast, a combination of shocks contributed to the trade recovery during 2009-2011.

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File URL: http://www.nber.org/papers/w16666.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16666.

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Date of creation: Jan 2011
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Handle: RePEc:nbr:nberwo:16666
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  1. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc.
  2. Trevor Tombe, 2012. "The Missing Food Problem," Working Papers tt0060, Wilfrid Laurier University, Department of Economics, revised 2012.
  3. George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008. "Inventories, Lumpy Trade, and Large Devaluations," NBER Working Papers 13790, National Bureau of Economic Research, Inc.
  4. Jonathan Eaton & Samuel Kortum & Brent Neiman, 2013. "On Deficits and Unemployment," Revue économique, Presses de Sciences-Po, vol. 64(3), pages 405-420.
  5. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
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  7. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  8. Nicolas Berman and Philippe Martin, 2010. "The Vulnerability Of Sub-Saharan Africa To The Financial Crisis: The Case Of Trade," RSCAS Working Papers 2010/15, European University Institute.
  9. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  10. Samuel S. Kortum & Jonathan Eaton & Brent Neiman & John Romalis, 2010. "Trade and the Global Recession," DEGIT Conference Papers c015_002, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. 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.
  12. repec:dgr:rugggd:gd-107 is not listed on IDEAS
  13. Virgiliu Midrigan & Joseph Kaboski & George Alessandria, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," 2010 Meeting Papers 107, Society for Economic Dynamics.
  14. Charles Engel & Jian Wang, 2007. "International trade in durable goods: understanding volatility, cyclicality, and elastics," Globalization and Monetary Policy Institute Working Paper 03, Federal Reserve Bank of Dallas.
  15. Fernandez, Roque B, 1981. "A Methodological Note on the Estimation of Time Series," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 471-76, August.
  16. Milton Friedman, 1962. "The Interpolation of Time Series by Related Series," NBER Books, National Bureau of Economic Research, Inc, number frie62-1, 07.
  17. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
  18. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
  19. The University of Iowa & Michael Waugh, 2008. "Bilateral Trade, Relative Prices, and Trade Costs," 2008 Meeting Papers 781, Society for Economic Dynamics.
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