Arm's-Length Trade : A Source of Post-Crisis Trade Weakness
Trade growth has slowed sharply since the global financial crisis. U.S. trade data highlights that arm's-length trade —trade between unaffiliated firms—accounts disproportionately for the overall post-crisis trade slowdown. This is partly beca...
| Main Authors: | , |
|---|---|
| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/659891499793795498/Arms-length-trade-a-source-of-post-crisis-trade-weakness http://hdl.handle.net/10986/27647 |
| Summary: | Trade growth has slowed sharply since
the global financial crisis. U.S. trade data highlights that
arm's-length trade —trade between unaffiliated
firms—accounts disproportionately for the overall
post-crisis trade slowdown. This is partly because
arm's-length trade depends more heavily than intra-firm
trade on emerging market and developing economies (EMDEs),
where output growth has slowed sharply from elevated
pre-crisis rates, and on sectors with rapid pre-crisis
growth that boosted arm's-length trade pre-crisis but
that have languished post-crisis. Compounding such
compositional effects, arm's-length trade is also more
sensitive to changes in demand and real exchange rates. For
example, the income elasticity of arm's-length exports
is about one-fifth higher than that of intra-firm exports.
Hence, post-crisis global growth weakness has weighed more
on arm's-length trade than on intra-firm trade.
Unaffiliated firms may also have been hindered more than
multinational firms by constrained access to finance during
the crisis, heightened policy uncertainty, and their typical
firm-level characteristics. |
|---|