6½ Decades of Global Trade and Income: “New Normal” or “Back to Normal” after GTC and GFC?

Sanjay Kalra

No 2016/139, IMF Working Papers from International Monetary Fund

Abstract: Global merchandise trade expanded rapidly over the last 6½ decades and its relationship with global income has seen ebbs and flows. This paper examines the shifts in this relationship using time series data over 1950-2014 and situates it in the current and longer term context. The conjunctural context comes from, among other things, the “great trade collapse” (GTC) and the global financial crisis (GFC) in 2009, and developments since then. The longer term context comes from the relative role of “globalization” and “technology” shocks in accounting for the short and long run variance of global exports and income. The paper estimates trade and income elasticities using ADL models taking account of structural breaks, and impulse response functions from structural VARs. The estimated SVAR model provides a lens to ask whether global trade and income are in a “new normal’ or only “back to (an old) normal” after the GTC and GFC.

Keywords: WP; least squares; Global Trade and Income; Elasticities; SVAR; Globalization; Technology shocks; Structural breaks; global export; export value; trade financing constraint; trade-income relationship; merchandise export; exports to income; trade slowdown; determinant resid covariance; Personal income; Exports; Structural vector autoregression; Export performance; Vector autoregression; Global; Eastern Europe (search for similar items in EconPapers)
Pages: 26
Date: 2016-07-12
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