Why World Exports are so Susceptible to the Economic Crisis --The Prevailing "Export Overshooting" Phenomenon
This paper provides some evidence of the "export overshooting" phenomenon, i.e., the unusually large deviation of exports from their long-run level. We study the export trends of a sample of 37 countries including both OECD and non-OECD countries over the period of 1994-2009. We find that exports overshot their equilibrium value during economic crises and that the tendency to overshoot was a worldwide phenomenon. The bullwhip effect was the driving force behind such a phenomenon. Moreover, the extent of export overshooting was increasing in more recent crisis, which can be attributed to an increase in cross-border vertical specialization over time.
The author would like to thank Yalin Alice Chiang for her excellent research assistance. The author would also like to thank the participants of 21st Annual East Asian Seminar on Economics (A Pacific Rim Perspective on the Financial Crisis, June 25-26, 2010) for their very helpful suggestions. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.