Container Trade and the U.S. Recovery

Center for Financial Studies Working Paper no. 659, 2021

47 Pages Posted: 18 Nov 2021

See all articles by Lutz Kilian

Lutz Kilian

Federal Reserve Banks - Federal Reserve Bank of Dallas; Centre for Economic Policy Research (CEPR)

Nikos K. Nomikos

Cass Business School, City University London

Xiaoqing Zhou

Federal Reserve Banks - Federal Reserve Bank of Dallas

Multiple version iconThere are 4 versions of this paper

Date Written: October 13, 2021

Abstract

Since the 1970s, exports and imports of manufactured goods have been the engine of international trade and much of that trade relies on container shipping. This paper introduces a new monthly index of the volume of container trade to and from North America. Incorporating this index into a structural macroeconomic VAR model facilitates the identification of shocks to domestic U.S. demand as well as foreign demand for U.S. manufactured goods. We show that, unlike in the Great Recession, the primary determinant of the U.S. economic contraction in early 2020 was a sharp drop in domestic demand. Although detrended data for personal consumption expenditures and manufacturing output suggest that the U.S. economy has recovered to near 90% of pre-pandemic levels as of March 2021, our structural VAR model shows that the component of manufacturing output driven by domestic demand had only recovered to 59% of pre-pandemic levels and that of real personal consumption only to 76%. The difference is mainly accounted for by unexpected reductions in frictions in the container shipping market.

Keywords: Merchandise trade, container, shipping, manufacturing, consumption, COVID-19, supply chain, recession, recovery, globalization

JEL Classification: E32, E37, F47, F62

Suggested Citation

Kilian, Lutz and Nomikos, Nikos K. and Zhou, Xiaoqing, Container Trade and the U.S. Recovery (October 13, 2021). Center for Financial Studies Working Paper no. 659, 2021, Available at SSRN: https://ssrn.com/abstract=3963305 or http://dx.doi.org/10.2139/ssrn.3963305

Lutz Kilian (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nikos K. Nomikos

Cass Business School, City University London ( email )

London, EC2Y 8HB
Great Britain

Xiaoqing Zhou

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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