Financial Crises and Emerging Market Trade
IMF Staff Position Notes, March 11, 2009
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Bibliographic details
- Authors: Alun H. Thomas
- Published: March 11, 2009
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781455280476.004
Overview
- Discusses various aspects of financial crises and emerging market trade in the context of the current global financial crisis and the sharp reduction in trade flows.
- Focuses on how access to capital affects firms’ ability to produce and sell exports and to buy imports.
- Emphasizes that trade finance is one component of credit conditions that influence trade volumes.
Key findings
- Financial conditions play a significant, however, not dominant role in stimulating trade volumes among emerging market countries.
- Trade finance is not the only form of credit with implications for trade volumes; working capital and long-term investment financing also matter through their impact on industrial production.
Quantitative estimates and scenarios
- The combination of zero net private capital flows to emerging markets and a domestic banking crisis could lower import volume growth by between 5 and 6 percent on impact.
- The effect on export volumes from the same combination is slightly lower than the impact on import volume growth.
Policy implications and recommendations
- Policymakers should consider supporting credit flows in general rather than focusing specifically on increasing trade finance, given that broader credit market conditions (including for working capital and long-term investment financing) affect international trade and industrial production.
Subjects and keywords
- Subject: Balance of payments, Banking crises, Exports, Financial crises, Imports, International trade, Private capital flows, Trade finance
- Keywords: Banking crises, commodity exporter, export, export deflator, exporter, Exports, Global, import, import deflator, Imports, Private capital flows, short-run export price elasticity, SPN, trade, Trade finance, trade finance variable
Financial Crises and Emerging Market Trade — IMF Staff Position Note No. 2009/004.
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- Financial Crises and Emerging Market Trade