IMF Working Papers

Quality and the Great Trade Collapse

Author/Editor:

Natalie Chen ; Luciana Juvenal

Publication Date:

February 18, 2016

Electronic Access:

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Summary:

We explore whether the global financial crisis has had heterogeneous effects on traded goods differentiated by quality. Combining a dataset of Argentinean firm-level destination-specific wine exports with quality ratings, we show that higher quality exports grew faster before the crisis, but this trend reversed during the recession. Quantitatively, the effect is large: up to nine percentage points difference in trade performance can be explained by the quality composition of exports. This flight from quality was triggered by a fall in aggregate demand, was more acute when households could substitute imports by domestic alternatives, and was stronger for smaller firms' exports.

Series:

Working Paper No. 16/30

Subject:

Argentina Exports Western Hemisphere