The Great Trade Collapse
We survey recent literature on the causes of the collapse in international trade during the 2008-2009 global recession. We argue that the evidence points to the collapse in aggregate expenditure, concentrated on trade-intensive durable goods, as the main driver of the trade collapse. Inventory adjustment likely amplified the impact of these expenditure changes on trade. In addition, shocks to credit supply constrained export supply further exacerbating the decline in trade. Most evidence suggests that changes in trade policy did not play a large role. We conclude that one benefit of the trade collapse is that it has stimulated research in neglected areas at the intersection of trade and macroeconomics.
The views expressed in this paper are those of the authors and do not necessarily reflect those of the National Bureau of Economic Research, the Federal Reserve Bank of Minneapolis, the Federal Reserve System, or the International Monetary Fund. When citing this paper, please use the following: Bems R, Johnson RC, Yi KM. 2013. The Great Trade Collapse. Annu. Rev. Econ. 5: Submitted. DOI: 10.1146/annurev-economics-082912-110201.
Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2013. "The Great Trade Collapse," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 375-400, 05. citation courtesy of