The Trade Response to Global Downturns : Historical Evidence

By Caroline Freund. 2009

203 citations recorded by the source corpus.

The author examines the impact of historical global downturns on trade flows. The results provide insight into why trade has dropped so dramatically in the current crisis, what is likely to happen in the coming years, how global imbalances are affected, and which regions and industries suffer most heavily. The author finds that the elasticity of global trade volumes to real world GDP has increased gradually from around 2 in the 1960s to above 3 now. The author also finds that trade is more responsive to GDP during global downturns than in tranquil times. The results suggest that the overall drop in real trade this year is likely to exceed 15 percent. There is significant variation across industries, with food and beverages the least affected and crude materials and fuels the most affected. On the positive side, trade tends to rebound very rapidly when the outlook brightens. The author also finds evidence that global downturns often lead to persistent improvements in the ratio of the trade balance to GDP in borrower countries.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f6cff423ecc157dd567c806d1b140cc14141291d

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Citations in the corpus

Demand Spillovers and the Collapse of Trade in the Global Recession (2010, background): “15See Freund (2009), Cheung and Guichard (2009), and Irwin (2002).”
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis (2012, background): “…the commercial paper market in North America and Europe, while the converse movements were observed as the crisis eased over time (Keogh, 2008; Freilich and McGeever, 2009; Brunnermeier, 2009).14 To the extent that the interbank rate is a noisymeasure of the actual cost of trade financing to…”