Alessandro Borin, Virginia Di Nino, Michele Mancini, Massimo Sbracia, 23 March 2017

Recent global trade growth is even more disappointing than global GDP growth. This column argues that this unexpected weakness of trade relative to GDP is related to the high volatility and pro-cyclicality of real trade flows, and that cyclical forces are the main drivers. It also shows that the accuracy of existing trade forecasts can be improved using real-time data on business conditions.

Antoine Berthou, Filippo di Mauro, 24 December 2015

The effect of exchange rate devaluations on a country’s exports is frequently debated, with some supporting a strong impact and others suggesting no sizeable response of exports to relative price changes. This column argues that firm heterogeneity in terms of productivity and size can explain the opposing views. The measured reaction of aggregate exports to relative price movements is largely determined by the reaction of the most productive/largest companies.

Leonardo Iacovone, Veronika Zavacka, 27 November 2009

Was the global credit crunch a cause of the great trade collapse? This chapter addresses this question by drawing on evidence from 23 historical banking crises. It shows that export growth was particularly slow in sectors that were particularly reliant on external finance (e.g. electric machinery). The findings suggest how credit problems may have played a role in today’s global crisis. The historical findings show that negative demand shocks have amplified negative effects on exports when teamed with a banking crisis, with this interaction being especially important in durable goods industries. The same combination of factors (financial constraints coupled with a demand slump) – but this time it is operating on a vastly larger scale – may have been central to the great trade collapse.

Caroline Freund, 27 November 2009

Previous global trade collapses provide insight into why trade has dropped so dramatically this time – and the future of trade and global imbalances. The findings suggest that the real trade drop in 2009 is likely to exceed 15%, but it should rebound very rapidly. Global imbalances have also moderated in crises, but this tends to be temporary unless the downturn alters investment attitudes and/or government policies. Today, governments should use the transition to install policies that will ensure that imbalances do not revert to pre-crisis trends – policies to encourage saving in the US and prevent an overvalued dollar, and policies to stimulate spending in China and other parts of Asia and prevent undervalued currencies


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