The Global Trade Slowdown: Cyclical or Structural?

By Cristina Constantinescu, Aaditya Mattoo, Michèle Ruta

January 21, 2015

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Cristina Constantinescu, Aaditya Mattoo, and Michèle Ruta. The Global Trade Slowdown: Cyclical or Structural?, (USA: International Monetary Fund, 2015) accessed November 21, 2024

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

This paper focuses on the sluggish growth of world trade relative to income growth in recent years. The analysis uses an empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow growth of Gross Domestic Product (GDP), but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that the explanation may lie in the slowing pace of international vertical specialization rather than increasing protection or the changing composition of trade and GDP.

Subject: Economic sectors, Financial crises, Global financial crisis of 2008-2009, Imports, International trade, Manufacturing, National accounts, Personal income

Keywords: Global, Global financial crisis of 2008-2009, Global Trade Slowdown, Import growth, Imports, Manufacturing, Personal income, Trade elasticity, Trade growth, Trade slowdown, Trade-income relationship, WP, WTO trade restrictiveness indicator

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/006
Stock No:

WPIEA2015006
ISBN:

9781498399135
ISSN:

1018-5941

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