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How Does Trade Evolve in the Aftermath of Financial Crises?
Author: Mr. Abdul d Abiad, Petia Topalova, and Ms. Prachi Mishra
Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 003
Language:
English
Publication Date:
01 Jan 2011
DOI:
https://doi.org/10.5089/9781455211814.001
ISBN:
9781455211814
ISSN:
1018-5941
Pages:
54
Keywords:
WP; crisis dummy; exchange rate; trade; financial crises; crisis t; trade dynamics; pair dummy; importer-exporter dummy; importer-exporter-year observation; exporter crisis indicator; Imports; Exports; Gravity models; Banking crises; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund