The great trade collapse and Indian firms

Pavel Chakraborty

The World Economy, 2018, vol. 41, issue 1, 100-125

Abstract: The collapse in global trade during the 2008–09 crisis has been widely studied using the developed nation(s) data. I use firm†level data from Indian manufacturers to show that: (a) Indian firms experience strong negative demand shocks concerning their exports to the USA and the EU, the effect being significantly higher in case of the USA. Results assert that 1% increase in the exposure towards the crisis†affected zones (the USA and the EU combined) reduces an average Indian manufacturing firm's export earnings by 1.17%–1.36%; (b) trade in consumer non†durables and durables are the two most affected sectors, impact being higher for the latter; (c) evidence in support of similar effects throughout the size distribution of firms, with the effect being highest for small or the most vulnerable firms; (d) drop in demand, as a result of the 2008–09 crisis, only affects the high†exposure industries. My results are robust to IV analysis and a variety of checks.

Date: 2018
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