NDLI: Does the post-crisis weakness of global trade solely reflect weak demand?

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Does the post-crisis weakness of global trade solely reflect weak demand?

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Does the post-crisis weakness of global trade solely reflect weak demand?

Content Provider	OECD iLibrary
Author	Ollivaud, Patrice Schwellnus, Cyrille
Abstract	Global trade growth over the past few years has appeared extraordinarily weak, even in relation to weak global GDP growth. This paper shows that the apparent breakdown in the relationship between global trade and global GDP growth is largely explained by two factors: an inappropriate measurement of global GDP and extraordinary demand weakness in the euro area. As a measure of demand for traded goods, global GDP at market exchange rates is more appropriate than the conventional purchasing power parity-based measure. Moreover, extraordinary demand weakness in the euro area – which is a particularly trade intensive region – has had a substantial negative effect on intra-euro area trade flows, which are commonly counted towards global trade. When global GDP is measured at market exchange rates and intra-euro area flows are removed from the measure of global trade, econometric estimations suggest that over the past 15 years the long-term elasticity of global trade to GDP has been similar to that of the 1990s. Indeed, the overwhelming part of postcrisis trade weakness can be attributed to weak global demand rather than structural changes, according to the econometric estimations in this paper and supporting evidence on changes in global investment, international production fragmentation and protectionism.
Starting Page	269
Ending Page	267
Volume Number	2015
Issue Number	1
Language	English
Publisher	OECD Publishing
Publisher Date	2015-12-22
Access Restriction	Open
Subject Keyword	Economics
Content Type	Text
Resource Type	Article

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