Interpreting the World Trade Collapse

7 Pages Posted: 22 Sep 2010

See all articles by Silvia Domit

Silvia Domit

Bank of England - Monetary Analysis

Tamarah Shakir

Bank of England - Monetary Analysis

Date Written: September 20, 2010

Abstract

World trade’s dramatic collapse from the end of 2008 was emblematic of a globally synchronised recession that threatened to become a depression and of a financial crisis painfully transmitted to the real economy. The extent of the fall in world trade relative to that in world GDP and the subsequent strength of the trade recovery so far suggests particular factors have been affecting global trade flows. This article considers the possible reasons for the pronounced fall and recovery in world trade relative to world GDP, focusing on UK export demand. At its core, the extraordinary decline in trade stemmed from the combination of a shock to global demand skewed towards highly tradable sectors and the ever-more globalised production process for these goods. The encouraging improvement in world trade from the second half of 2009 can also be attributed to some of these factors, as well as suggesting that permanent damage to the global marketplace may be less extensive than first feared.

Suggested Citation

Domit, Silvia and Shakir, Tamarah, Interpreting the World Trade Collapse (September 20, 2010). Bank of England Quarterly Bulletin 2010 Q3, Available at SSRN: https://ssrn.com/abstract=1680330

Silvia Domit

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Tamarah Shakir (Contact Author)

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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