Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008–2009 Crisis

Abstract

We identify a new set of stylized facts on the 2008-2009 trade collapse that we hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, we decompose the fall in international trade into product entry and exit, price changes, and quantity changes for imports by Brazil, the European Union, Indonesia, and the United States. When we aggregate across all products, most of the countries analyzed experienced a decline in new products, a rise in product exit, and falls in quantity for product lines that continued to be traded. The evidence suggests that the intensive rather than extensive margin mattered the most, consistent with studies of other countries and previous recessionary periods. On average, quantities declined and prices fell. However, these average effects mask enormous differences across different products. Price declines were driven primarily by commodities. Within manufacturing, while most quantity changes were negative, in most cases price changes moved in the opposite direction. Consequently, within manufacturing, there is some evidence consistent with the hypothesis that supply side frictions played a role. For the United States, price increases were most significant in sectors which are typically credit constrained.

The Great Collapse in Value Added Trade

“…As a consequence both the intensive and the extensive margin are affected since a deterioration in credit conditions lowers both the equilibrium size as well as profitability of each export flow. Empirical evidence suggests that trade financing costs increased substantially during the great trade collapse (Auboin, ; Asmundson et al, ) and that this may have resulted in an increase in import prices of manufactured goods particularly in sectors highly dependent on external financing (Haddad et al, ). This implies that the price of intermediates sourced from abroad increased relative to the one of inputs from domestic suppliers and hence made the former relatively less attractive during the financial crisis.…”

“…Therefore, differentiating between real and nominal data is important since current price data inflates value added trade growth in most normal years as well as overstates the drop in value added trade in constant prices by a little more than a third. Similarly, in the literature on the great trade collapse Levchenko et al () report that roughly one third of the decline in gross trade values was due to changes in prices whereas many others have found that price movements played a negligible role in explaining the phenomenon (Gopinath et al, ; Haddad et al, ; Behrens et al, ; Bricongne et al, ).…”

“…commodities vs manufactures) may potentially have a bearing on our results. For example, the literature on the great trade collapse has documented that the price of manufactured goods increased (Haddad et al, ) or remained broadly stable (Gopinath et al, ) while the prices of other goods declined substantially in the crisis year. The expenditure on sectors whose prices increased relative to those of other sectors mechanically gains weight relative to the rest, which may erroneously lead us to conclude that vertical specialization has changed even though in constant prices the Leontief inverse matrix would have remained constant.…”

The anatomy of a trade collapse: the UK, 1929–1933

“…Fourth, the GTC was overwhelmingly due to changes along the intensive margin, rather than the extensive margin (as predicted by ; see Levchenko et al, 2010;Haddad et al, 2010;Bricongne et al, 2012). 2 Fifth, the GTC saw imports in some sectors fall more rapidly than others.…”

Les consequences de la crise financiere sur le commerce intra- -europeen

“…Les fl ux commerciaux internationaux ont été marqués par une contraction soudaine et sévère et qui reste la plus forte enregistrée depuis la fi n de la Seconde Guerre. Au niveau mondial [Baldwin 2009;Haddad, Harrison et Hausman 2011] et à l'échelle européenne [Cheptea, Fontagné et Soledad 2014], un consensus semble avoir émergé qui attribue cet eff ondrement des échanges commerciaux à un choc de demande sévère synchronisé entre les pays. Ce mouvement de repli a été renforcé par une conjonction de facteurs : des achats de biens ont été retardés ; les contraintes de fi nancement se sont resserrées ; les structures productives fragmentées entre pays ont exercé un puissant eff et d'entraînement sur la transmission du choc fi nancier au niveau du commerce international.…”