The Great Trade Collapse: An Evaluation of Competing Stories

Hakan Yilmazkuday

No 1902, Working Papers from Florida International University, Department of Economics

Abstract: The reduction in international trade has been more than the reduction in economic activity during the 2008 financial crisis, against the one-to-one relationship between them implied by standard trade models. This so-called the great trade collapse (GTC) has been investigated extensively in the literature resulting in alternative competing stories as potential explanations. By introducing and estimating a dynamic stochastic general equilibrium model using eighteen quarterly series from the U.S., including those that represent the competing stories, this paper evaluates the contribution of each story to GTC. The results show that retail inventories have contributed the most to the collapse and the corresponding recovery, followed by protectionist policies, intermediate-input trade, and trade finance. Productivity and demand shocks have played negligible roles.

Keywords: Trade Collapse; Inventories; Intermediate Inputs; Trade Finance; Protectionist Policies (search for similar items in EconPapers)
JEL-codes: E32 F12 F41 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2019-08
New Economics Papers: this item is included in nep-dge, nep-int and nep-mac
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https://economics.fiu.edu/research/pdfs/2019_working_papers/1902.pdf First version, 2019 (application/pdf)

Related works:
Journal Article: THE GREAT TRADE COLLAPSE: AN EVALUATION OF COMPETING STORIES (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fiu:wpaper:1902

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