Demand Spillovers and the Collapse of Trade in the Global Recession

Author/Editor:

Kei-Mu Yi ; Rudolfs Bems ; Robert C. Johnson

Publication Date:

June 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses a global input-output framework to quantify US and EU demand spillovers and the elasticity of world trade to GDP during the global recession of 2008-2009. We find that 20-30 percent of the decline in the US and EU demand was borne by foreign countries, with NAFTA, Emerging Europe, and Asia hit hardest. Allowing demand to change in all countries simultaneously, our framework delivers an elasticity of world trade to GDP of nearly 3. Thus, demand alone can account for 70 percent of the trade collapse. Large changes in demand for durables play an important role in driving these results.

Series:

Working Paper No. 2010/142

Subject:

Demand elasticity Exports Imports North American Free Trade Agreement Trade in goods

English

Publication Date:

June 1, 2010

ISBN/ISSN:

9781455201259/1018-5941

Stock No:

WPIEA2010142

Pages:

45

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