The Trade Response to Global Downturns : Historical Evidence
The author examines the impact of historical global downturns on trade flows. The results provide insight into why trade has dropped so dramatically in the current crisis, what is likely to happen in the coming years, how global imbalances are affe...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090806152233 http://hdl.handle.net/10986/4208 |
| Summary: | The author examines the impact of
historical global downturns on trade flows. The results
provide insight into why trade has dropped so dramatically
in the current crisis, what is likely to happen in the
coming years, how global imbalances are affected, and which
regions and industries suffer most heavily. The author finds
that the elasticity of global trade volumes to real world
GDP has increased gradually from around 2 in the 1960s to
above 3 now. The author also finds that trade is more
responsive to GDP during global downturns than in tranquil
times. The results suggest that the overall drop in real
trade this year is likely to exceed 15 percent. There is
significant variation across industries, with food and
beverages the least affected and crude materials and fuels
the most affected. On the positive side, trade tends to
rebound very rapidly when the outlook brightens. The author
also finds evidence that global downturns often lead to
persistent improvements in the ratio of the trade balance to
GDP in borrower countries. |
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