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Demand Spillovers and the Collapse of Trade in the Global Recession

Author/Editor: Yi, Kei-Mu | Bems, Rudolfs | Johnson, Robert
Authorized for Distribution: June 1, 2010
Electronic Access: Free Full Text (PDF file size is 954KB)
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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.
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Series: Working Paper No. 10/142
Subject(s): Economic recession | Global Financial Crisis 2008-2009 | Demand elasticity | Gross domestic product
Author's keyword(s): Demand spillovers | trade collapse | input-output model | trade elasticity
    Published:   June 1, 2010        
    ISBN/ISSN:   9781455201259   Format:   Paper
    Stock No:   WPIEA2010142        
    Price:   US$18.00
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