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Trade spillovers on output growth during the 2008 financial crisis

Author

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  • Jean-Sébastien Pentecôte
  • Fabien Rondeau
Abstract
This paper gives an empirical assessment of the extent to which a financial crash in a country can slowdown the domestic economic growth and how these effects can spread through trade relationships. First, we modify the Cerra and Saxena?s (2008) methodology in order to understand the interplay between economic activity and foreign trade during the 2008 financial crisis. Our sample is made of monthly data for 26 countries over 1993–2013. We then simulate the dynamic responses of domestic activity to a demand shock and to a financial crisis. Trade contributes to growth in the context of a demand shock (from 63% for developing countries to 433% for NAFTA) whereas it dampens output loss in the context of the 2008 financial crisis (from -38% for developing countries to -127% for NAFTA).

Suggested Citation

  • Jean-Sébastien Pentecôte & Fabien Rondeau, 2015. "Trade spillovers on output growth during the 2008 financial crisis," International Economics, CEPII research center, issue 143, pages 36-47.
    • Handle: RePEc:cii:cepiie:2015-q3-143-3
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    File URL: http://www.sciencedirect.com/science/article/pii/S2110701715000256
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    References listed on IDEAS

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    6. Stefan Pahl & Clara Brandi & Jakob Schwab & Frederik Stender, 2022. "Cling together, swing together: The contagious effects of COVID‐19 on developing countries through global value chains," The World Economy, Wiley Blackwell, vol. 45(2), pages 539-560, February.

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    More about this item

    Keywords

    Global Financial Crisis; Output loss; Trade spillovers; Impulse response functions;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G01 - Financial Economics - - General - - - Financial Crises
    • F15 - International Economics - - Trade - - - Economic Integration

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