The potential impact of the global financial crisis on world trade

Warwick McKibbin and Andrew Stoeckel

No 5134, Policy Research Working Paper Series from The World Bank

Abstract: This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households and international investors in a global economic model. The model has six sectors of production and trade in 15 major economies and regions. The paper shows that the shocks observed in financial markets can be used to generate the severe economic contraction in global trade and production experienced in 2009. In particular the distinction between the production and trade of durable and non durable goods plays a key role in explaining the much larger contraction in trade than GDP experienced by most economies. The paper explores the implications of the large increase in fiscal deficits and the implications of a global trade war in response to the financial crisis.

Keywords: Economic Theory&Research; Debt Markets; Emerging Markets; Banks&Banking Reform; Labor Policies (search for similar items in EconPapers)
Date: 2009-11-01
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5134

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