Trade Finance and the Great Trade Collapse

Economic models that do not incorporate financial frictions only explain about 70 to 80 percent of the decline in world trade that occurred in the 2008-2009 crisis. We review evidence that shows financial factors also contributed to the great trade collapse and uncover two new stylized facts in supp...

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Bibliographic Details
Published in:The American economic review 2011-05, Vol.101 (3), p.298-302
Main Authors: Ahn, JaeBin, Amiti, Mary, Weinstein, David E.
Format: Article
Language:English
Subjects:
Accounts receivable
Analysis
Bankruptcy
Borrowing
Capital expenditures
Central banks
Econometrics
Economic models
Economic theory
Elasticity of demand
Exporters
Exports
Finance
Foreign trade
GDP
Gross Domestic Product
Import prices
Imports
International trade
LIBOR
Lines of credit
Prepayments
Purchase orders
Studies
Supply shocks
THE GREAT TRADE COLLAPSE OF 2008-2009
Trade
Trade credit
Trade finance
Trade flows
Trade in services
Trade models
Trade policy
Trade relations
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Summary:Economic models that do not incorporate financial frictions only explain about 70 to 80 percent of the decline in world trade that occurred in the 2008-2009 crisis. We review evidence that shows financial factors also contributed to the great trade collapse and uncover two new stylized facts in support of it. First, we show that the prices of manufactured exports rose relative to domestic prices during the crisis. Second, we show that US seaborne exports and imports, which are likely to be more sensitive to trade finance problems, saw their prices rise relative to goods shipped by air or land. [PUBLICATION ABSTRACT]
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.101.3.298