2019/09/03 by Hakan Yilmazkuday · 1 voice · 1 citation
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Global trade and economics #Monetary Policy and Economic Impact
paper · doi:10.1017/s1365100519000683
openalex publication_date 2019/09/03 · openalex created_date 2025/10/10 · openalex updated_date 2026/05/21
The reduction in international trade has been more than the reduction in economic activity during the 2008 financial crisis, against the one-to-one relationship between them implied by standard trade models. This so-called the Great Trade Collapse (GTC) has been investigated extensively in the literature resulting in alternative competing stories as potential explanations. By introducing and estimating a dynamic stochastic general equilibrium model using 18 quarterly series from the USA, including those that represent the competing stories, this paper evaluates the contribution of each story to GTC. The results show that retail inventories have contributed the most to the collapse and the corresponding recovery, followed by protectionist policies, intermediate-input trade, and trade finance. Productivity and demand shocks have played negligible roles.