The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun

56 Pages Posted: 4 Jun 2010 Last revised: 27 Sep 2010

See all articles by Andrei A. Levchenko

Andrei A. Levchenko

University of Michigan - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Logan T. Lewis

Federal Reserve Board, Trade and Quantitative Studies

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 2010

Abstract

One of the most striking aspects of the recent recession is the collapse in international trade. This paper uses disaggregated data on U.S. imports and exports to shed light on the anatomy of this collapse. We find that the recent reduction in trade relative to overall economic activity is far larger than in previous downturns. Information on quantities and prices of both domestic absorption and imports reveals a 40% shortfall in imports, relative to what would be predicted by a simple import demand relationship. In a sample of imports and exports disaggregated at the 6-digit NAICS level, we find that sectors used as intermediate inputs experienced significantly higher percentage reductions in both imports and exports. We also find support for compositional effects: sectors with larger reductions in domestic output had larger drops in trade. By contrast, we find no support for the hypothesis that trade credit played a role in the recent trade collapse.

Suggested Citation

Levchenko, Andrei A. and Lewis, Logan T. and Tesar, Linda L., The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun (May 2010). NBER Working Paper No. w16006. Available at SSRN: https://ssrn.com/abstract=1612601

Andrei A. Levchenko (Contact Author)

University of Michigan - Department of Economics ( email )

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HOME PAGE: http://alevchenko.com

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Logan T. Lewis

Federal Reserve Board, Trade and Quantitative Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-763-2254 (Phone)
734-764-2769 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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