The Great Trade Collapse: A Horse Race of Competing Stories
Florida International University
May 12, 2013
This paper compares the contribution of several competing stories to the decline of trade (with respect to production) in the U.S. during the economic crisis of late 2008 and 2009. A dynamic trade model that considers up to eleven possible shocks is introduced. The benchmark model and its variants are estimated using up to seven series of quarterly data including U.S. trade and production. The estimation results show that trade costs have contributed most to the Great Trade Collapse, while including inventories and intermediate-inputs trade is essential to match the data. Other considered shocks either have minor contributions or are econometrically insignificant.
Number of Pages in PDF File: 51
Keywords: Trade Collapse, Inventories, Export Costs, the U.S.
JEL Classification: E32, F12, F41
Date posted: November 4, 2012 ; Last revised: May 13, 2013