NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trade and the Global Recession

Jonathan Eaton, Samuel Kortum, Brent Neiman, John Romalis

NBER Working Paper No. 16666
Issued in January 2011
NBER Program(s):   EFG   IFM   ITI   PR

Global trade fell 30 percent relative to GDP during the Great Recession of 2008-2009. Did this collapse result from factors impeding international transactions or did it simply reflect the greater severity of the recession in highly traded sectors? We answer this question with detailed international data, interpreted within a general-equilibrium trade model. Counterfactual simulations of the model show that a shift in spending away from manufactures, particularly durables, accounts for more than 80 percent of the drop in trade/GDP. Increased trade impediments reduced trade in some countries, but globally the impact of these changes largely cancels out.

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Document Object Identifier (DOI): 10.3386/w16666

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