Global Trade Finance, Trade Collapse and Trade Slowdown: A Granger Causality Analysis

International Institute of Social Studies Working Paper No. 633

20 Pages Posted: 12 Mar 2018

See all articles by Kim Tùng Đào

Kim Tùng Đào

Independent

Peter A. G. van Bergeijk

Erasmus University - Institute of Social Studies (ISS)

Date Written: January 7, 2018

Abstract

This research paper provides a causality assessment on the linkage between declines in world trade finance and the world trade collapse in the period following the Financial Crisis of 2008 and 2009 as well as the ensuing global trade slowdown. The paper performs Granger Causality tests on two time series: World trade (volume data acquired from the CPB World Trade Monitor) and World trade finance (transaction data acquired from SWIFT), using global monthly data from January 2007 to May 2017. In the short run, Granger causality always runs one-way from world trade finance to world trade. We always find two-way Granger causality for lags longer than two years. Importantly Granger causality never runs one-way from world trade to world trade finance. Given the short-term nature of trade finance, we conclude that world trade finance Granger-causes world trade.

Keywords: World Trade, World Trade Collapse, World Trade Slow-Down, Trade Finance, Granger Causality, Financial Crisis, SWIFT

JEL Classification: F10, F34, F40, F65, G01, G21

Suggested Citation

Đào, Kim Tùng and van Bergeijk, Peter A.G., Global Trade Finance, Trade Collapse and Trade Slowdown: A Granger Causality Analysis (January 7, 2018). International Institute of Social Studies Working Paper No. 633. Available at SSRN: https://ssrn.com/abstract=3135988 or http://dx.doi.org/10.2139/ssrn.3135988

Kim Tùng Đào

Independent ( email )

No Address Available

Peter A.G. Van Bergeijk (Contact Author)

Erasmus University - Institute of Social Studies (ISS) ( email )

PO Box 29776
2502 LT The Hague, 2518 AX
Netherlands

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