Does the Global Trade Slowdown Matter?

26 Pages Posted: 16 May 2016 Last revised: 30 Apr 2018

See all articles by Cristina Neagu

Cristina Neagu

World Bank

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

Date Written: May 13, 2016

Abstract

Since the Global Financial Crisis, world trade growth has been subdued and lagging slightly behind growth of gross domestic product. Trade is growing more slowly not only because growth of global gross domestic product is lower, but also because trade itself has become less responsive to gross domestic product. This paper reviews the reasons behind the changing trade-income relationship, and then investigates its consequences for economic growth. On the demand side, sluggish world import growth may adversely affect individual countries' economic growth, as it limits opportunities for their exports. On the supply side, slower trade may diminish the scope for productivity growth through increasing specialization and diffusion of technologies. The paper finds preliminary evidence that the changing trade-income relationship matters, although the quantifiable effects do not appear to be large.

Keywords: International Trade and Trade Rules, Economic Growth, Economic Theory & Research, Industrial Economics, Food & Beverage Industry, Plastics & Rubber Industry, General Manufacturing, Business Cycles and Stabilization Policies, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Common Carriers Industry, Construction Industry, Labor Markets, Transport and Trade Logistics

Suggested Citation

Neagu, Cristina and Mattoo, Aaditya and Ruta, Michele and Constantinescu, Ileana Cristina, Does the Global Trade Slowdown Matter? (May 13, 2016). World Bank Policy Research Working Paper No. 7673. Available at SSRN: https://ssrn.com/abstract=2779830

Cristina Neagu (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Aaditya Mattoo

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

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

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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