Trade and the global recession

Jonathan Eaton, Samuel Kortum, Brent Neiman, John Romalis

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55 Scopus citations

Abstract

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).

Original languageEnglish (US)
Pages (from-to)3401-3438
Number of pages38
JournalAmerican Economic Review
Volume106
Issue number11
DOIs
StatePublished - Nov 2016

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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    Eaton, J., Kortum, S., Neiman, B., & Romalis, J. (2016). Trade and the global recession. American Economic Review, 106(11), 3401-3438. https://doi.org/10.1257/aer.20101557