Demand Spillovers and the Collapse of Trade in the Global Recession

Rudolfs Bems, Robert Johnson and Kei-Mu Yi

IMF Economic Review, 2010, vol. 58, issue 2, 295-326

Abstract: This paper uses a global input-output framework to quantify U.S. and European Union (EU) demand spillovers and the elasticity of world trade to GDP during the global recession of 2008–09. Cross-border intermediate goods linkages have implications for the transmission of shocks and the relationship between demand, trade, and production across countries. This paper finds that 20–30 percent of the decline in U.S. and EU final demand was borne by foreign countries, with the North American Free Trade Agreement (NAFTA) and emerging Europe hit hardest. Allowing final demand to change in all countries simultaneously, the framework presented here delivers an elasticity of world trade to GDP of 2.8. Thus, demand forces alone can account for roughly 70 percent of the trade collapse. Large changes in demand for durables play an important role in driving these results.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (188)

Downloads: (external link)
http://www.palgrave-journals.com/imfer/journal/v58/n2/pdf/imfer201015a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/imfer/journal/v58/n2/full/imfer201015a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Demand Spillovers and the Collapse of Trade in the Global Recession (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:58:y:2010:i:2:p:295-326

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

Access Statistics for this article

More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().