Working Paper: CEPR ID: DP9158
Authors: Gita Gopinath; Oleg Itskhoki; Brent Neiman
Abstract: We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we fi nd that di fferentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-diff erentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among diff erentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices.
Keywords: Durable Goods; Global Trade Collapse; Great Recession; Import and Export Prices
JEL Codes: F10; F14; F44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price stability (E31) | reduced trade volumes (F19) |
| decline in trade volumes (F19) | price adjustments (L11) |
| economic shocks (F69) | price adjustment behavior (D40) |