The Global Trade Slowdown: Cyclical or Structural?

46 Pages Posted: 20 Apr 2016 Last revised: 30 Apr 2018

See all articles by Cristina Constantinescu

Cristina Constantinescu

International Monetary Fund (IMF)

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Ileana Cristina Constantinescu

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2015

Abstract

This paper focuses on the sluggish growth of world trade relative to income growth in recent years. The analysis uses an empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow growth of gross domestic product, but also because of a structural change in the trade-gross domestic product relationship in recent years. The available evidence suggests that the explanation may lie in the slowing pace of international vertical specialization rather than increasing protection or the changing composition of trade and gross domestic product.

Keywords: International Trade and Trade Rules, Food & Beverage Industry, General Manufacturing, Construction Industry, Common Carriers Industry, Pulp & Paper Industry, Textiles, Apparel & Leather Industry, Plastics & Rubber Industry, Business Cycles and Stabilization Policies, Trade and Services, Economics and Finance of Public Institution Development, Public Sector Administrative & Civil Service Reform, De Facto Governments, Democratic Government, State Owned Enterprise Reform, Public Sector Administrative and Civil Service Reform, Energy and Environment, Energy and Mining, Energy Demand

Suggested Citation

Constantinescu, Cristina and Mattoo, Aaditya and Ruta, Michele and Constantinescu, Ileana Cristina, The Global Trade Slowdown: Cyclical or Structural? (January 1, 2015). World Bank Policy Research Working Paper No. 7158. Available at SSRN: https://ssrn.com/abstract=2546577

Cristina Constantinescu (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
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HOME PAGE: http://econ.worldbank.org/staff/amattoo

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ileana Cristina Constantinescu

World Bank

1818 H Street, NW
Washington, DC 20433
United States

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