NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trade Prices and the Global Trade Collapse of 2008-2009

Gita Gopinath, Oleg Itskhoki, Brent Neiman

NBER Working Paper No. 17594
Issued in November 2011
NBER Program(s):   EFG   IFM   ITI   ME

We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices.

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This paper was revised on July 31, 2012

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Document Object Identifier (DOI): 10.3386/w17594

Published: “Trade Prices and the Global Trade Collapse of 2008-09” (with Oleg Itskhoki and Brent Neiman) IMF Economic Review, September 2012, Volume 60

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