The Global Trade Slowdown: A Dynamic Approach

Carter Mix and George Alessandria
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Carter Mix: University of Rochester

No 907, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Since 2012, global trade growth has slowed significantly relative to both its historical trend and output growth. There is some debate around whether this slowdown is due to cyclical or structural factors. The answer to this question has important implications for future trade growth. We develop a dynamic quantitative two-country model in which trade responds gradually to changes in trade costs. We capture cyclical and structural factors with movements in productivity and trade costs. We use Bayesian estimation to match the model with time series from the data. We then compute the contributions of cyclical and structural factors on the slowdown. Our model also offers insights on how changes in productivity and trade costs affect trade and output in different ways.

Date: 2017
New Economics Papers: this item is included in nep-dge and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:907

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