Trade Finance and the Great Trade Collapse
Mary Amiti, and
David E. Weinstein. 2011. "Trade Finance and the Great Trade Collapse."
American Economic Review,
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.
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Ahn, JaeBin (Columbia U)
Amiti, Mary (Federal Reserve Bank of New York)
Weinstein, David E. (Columbia U)
E32: Business Fluctuations; Cycles
F14: Country and Industry Studies of Trade
F44: International Business Cycles
G01: Financial Crises