TY - JOUR
T1 - Trade and the global recession
AU - Eaton, Jonathan
AU - Kortum, Samuel
AU - Neiman, Brent
AU - Romalis, John
N1 - Funding Information:
This research was funded in part by the Neubauer Family Foundation and the Charles E. Merrill Faculty Research Fund at the University of Chicago Booth School of Business. Eaton and Kortum gratefully acknowledge the support of the National Science Foundation under grant SES-0820338. Neiman gratefully acknowledges the support of the National Science Foundation under grant 1061954. Eaton gratefully acknowledges the support of the National Science Foundation under grant SES-1426267.
PY - 2016/11
Y1 - 2016/11
N2 - We develop a dynamic multicountry general equilibrium model to investigate forces acting on the global economy during the Great Recession and ensuing recovery. Our multisector framework accounts completely for countries' trade, investment, production, and GDPs in terms of different sets of shocks. Applying the model to 21 countries, we investigate the 29 percent drop in world trade in manufactures during the period 2008-2009. A shift in final spending away from tradable sectors, largely caused by declines in durables investment efficiency, accounts for most of the collapse in trade relative to GDP. Shocks to trade frictions, productivity, and demand play minor roles. (JEL E3, F1, F4).
AB - We develop a dynamic multicountry general equilibrium model to investigate forces acting on the global economy during the Great Recession and ensuing recovery. Our multisector framework accounts completely for countries' trade, investment, production, and GDPs in terms of different sets of shocks. Applying the model to 21 countries, we investigate the 29 percent drop in world trade in manufactures during the period 2008-2009. A shift in final spending away from tradable sectors, largely caused by declines in durables investment efficiency, accounts for most of the collapse in trade relative to GDP. Shocks to trade frictions, productivity, and demand play minor roles. (JEL E3, F1, F4).
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U2 - 10.1257/aer.20101557
DO - 10.1257/aer.20101557
M3 - Article
AN - SCOPUS:84994236804
SN - 0002-8282
VL - 106
SP - 3401
EP - 3438
JO - American Economic Review
JF - American Economic Review
IS - 11
ER -