EconPapers    
Economics at your fingertips  
 

The great trade collapse of 2008-2009: an inventory adjustment?

George Alessandria (), Joseph Kaboski and Virgiliu Midrigan ()

No 10-18, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper examines the role of inventories in the decline of production, trade, and expenditures in the US in the economic crisis of late 2008 and 2009. Empirically, the authors show that international trade declined more drastically than trade-weighted production or absorption and there was a sizeable inventory adjustment. This is most clearly evident for autos, the industry with the largest drop in trade. However, relative to the magnitude of the US downturn, these movements in trade are quite typical. The authors develop a two-country general equilibrium model with endogenous inventory holdings in response to frictions in domestic and foreign transactions costs. With more severe frictions on international transactions, in a downturn, the calibrated model shows a larger decline in output and an even larger decline in international trade, relative to a more standard model without inventories. The magnitudes of production, trade, and inventory responses are quantitatively similar to those observed in the current and previous US recessions.

Keywords: Inventories; Global financial crisis; International trade (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-int and nep-opm
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (70) Track citations by RSS feed

Downloads: (external link)
http://www.philadelphiafed.org/research-and-data/p ... ers/2010/wp10-18.pdf (application/pdf)

Related works:
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:fip:fedpwp:10-18

Ordering information: This working paper can be ordered from
http://www.phil.frb.org/econ/wps/index.html

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().

 
Page updated 2019-11-11
Handle: RePEc:fip:fedpwp:10-18