Trade Prices and the Global Trade Collapse of 2008-2009

29 Pages Posted: 15 Nov 2011 Last revised: 18 Nov 2011

See all articles by Gita Gopinath

Gita Gopinath

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Oleg Itskhoki

Princeton University - Department of Economics

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

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Date Written: November 2011

Abstract

We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices.

Suggested Citation

Gopinath, Gita and Itskhoki, Oleg and Neiman, Brent, Trade Prices and the Global Trade Collapse of 2008-2009 (November 2011). NBER Working Paper No. w17594. Available at SSRN: https://ssrn.com/abstract=1960140

Gita Gopinath (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

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Oleg Itskhoki

Princeton University - Department of Economics ( email )

Fisher 306
Princeton, NJ 08544-1021
United States
+1 (609) 258-5493 (Phone)

HOME PAGE: http://www.princeton.edu/~itskhoki

Brent Neiman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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