How Does Trade Evolve in the Aftermath of Financial Crises?

Author/Editor:

Abdul d Abiad ; Petia Topalova ; Prachi Mishra

Publication Date:

January 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we find that there is a sharp decline in a country’s imports in the year following a crisis-19 percent, on average-and this decline is persistent, with imports recovering to their gravity-predicted levels only after 10 years. In contrast, exports of the crisis country are not adversely affected, and they remain close to the predicted level in both the short and medium-term.

Series:

Working Paper No. 2011/003

Subject:

Banking crises Econometric analysis Exports Financial crises Gravity models Imports International trade

English

Publication Date:

January 1, 2011

ISBN/ISSN:

9781455211814/1018-5941

Stock No:

WPIEA2011003

Pages:

54

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