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Trade Linkages and Crisis Spillovers

Kornkarun Cheewatrakoolpong () and Somprawin Manprasert ()

Asian Economic Papers, 2014, vol. 13, issue 1, 84-103

Abstract: Many empirical studies find little evidence to support trade linkages as a channel for crisis spillovers during the 2008–09 global financial crisis, although trade linkages were one of the most important crisis transmission channels during 1971–97. A reason that may explain why trade linkages play a less important role in recent years is the changing composition of trade. In particular, the increasing formation of international production networks implies that trade increasingly involves indirect trade linkages. As a result, direct trade statistics may fail to accurately to capture the total trade exposure. In our study, we estimate total trade linkages by including indirect trade linkages obtained from the construction of a trade matrix. When we account for indirect trade linkages, we find that export dependency on the U.S. market still helps to explain crisis severity for developed countries. © 2014 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Keywords: crisis spillovers; crisis transmission; subprime crisis; indirect trade linkages (search for similar items in EconPapers)
JEL-codes: F14 F41 F42 (search for similar items in EconPapers)
Date: 2014
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