Working Paper: NBER ID: w16253
Authors: Mona Haddad; Ann Harrison; Catherine Hausman
Abstract: We identify a new set of stylized facts on the 2008-2009 trade collapse that we hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, we decompose the fall in international trade into product entry and exit, price changes, and quantity changes for imports by Brazil, the European Union, Indonesia, and the United States. When we aggregate across all products, most of the countries analyzed experienced a decline in new products, a rise in product exit, and falls in quantity for product lines that continued to be traded. The evidence suggests that the intensive rather than extensive margin mattered the most, consistent with studies of other countries and previous recessionary periods. On average, quantities declined and prices fell. However, these average effects mask enormous differences across different products. Price declines were driven primarily by commodities. Within manufacturing, while most quantity changes were negative, in most cases price changes moved in the opposite direction. Consequently, within manufacturing, there is some evidence consistent with the hypothesis that supply side frictions played a role. For the United States, price increases were most significant in sectors which are typically credit constrained.
Keywords: trade collapse; 2008-2009 crisis; demand and supply-side factors; price changes; quantity changes
JEL Codes: F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| negative demand shock (E31) | decline in international trade (F19) |
| decline in international trade (F19) | simultaneous declines in both prices and quantities (E31) |
| decline in international trade (F19) | decrease in new products (L15) |
| decline in international trade (F19) | increase in product exit (L19) |
| decline in international trade (F19) | fall in quantity for products that continued to be traded (F14) |
| intensive margin changes (J62) | decline in international trade (F19) |
| extensive margin changes (F12) | decline in international trade (F19) |
| supply-side frictions (F16) | price declines (E30) |
| credit constraints in certain sectors (G21) | price increases for dependent products (D49) |
| demand-side factors (J23) | trade collapse (F19) |