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American Economic Review: Vol. 101 No. 3 (May 2011)

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Vertical Linkages and the Collapse of Global Trade

Article Citation

Bems, Rudolfs, Robert C. Johnson, and Kei-Mu Yi. 2011. "Vertical Linkages and the Collapse of Global Trade." American Economic Review, 101(3): 308-12.

DOI: 10.1257/aer.101.3.308

Abstract

A common view is that cross-border vertical linkages played a key role in the 2008-2009 collapse of global trade. This paper presents two accounting results from a global input-output framework that shed light on this channel. We feed in observed changes in final demand and find that trade in final goods fell by twice as much as trade in intermediate goods. Nevertheless, intermediate goods account for more than two-fifths of the trade collapse. We also find that vertical specialization trade fell 13 percent, while value-added trade fell by 10 percent, because declines in demand were largest in highly vertically-specialized sectors.

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Authors

Bems, Rudolfs (IMF)
Johnson, Robert C. (Dartmouth College)
Yi, Kei-Mu (Federal Reserve Bank of Minneapolis)

JEL Classifications

E32: Business Fluctuations; Cycles
F14: Country and Industry Studies of Trade
F44: International Business Cycles
G01: Financial Crises


American Economic Review


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