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How Does Trade Evolve in the Aftermath of Financial Crises?

Author

Listed:
  • Mr. Abdul d Abiad
  • Petia Topalova
  • Ms. Prachi Mishra

Abstract

We analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we find that there is a sharp decline in a country’s imports in the year following a crisis-19 percent, on average-and this decline is persistent, with imports recovering to their gravity-predicted levels only after 10 years. In contrast, exports of the crisis country are not adversely affected, and they remain close to the predicted level in both the short and medium-term.

Suggested Citation

  • Mr. Abdul d Abiad & Petia Topalova & Ms. Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 2011/003, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/003
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