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Does the Post-Crisis Weakness of Global Trade Solely Reflect Weak Demand?

Author

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  • Patrice Ollivaud

    (OECD)

  • Cyrille Schwellnus
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 post-crisis 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. La faiblesse du commerce mondiale après la crise reflète-t-elle seulement une faible demande? La croissance du commerce mondial a été particulièrement faible ces dernières années, même relativement à la croissance du PIB mondial. Ce papier montre que cette apparente rupture dans la relation entre croissance du commerce mondial et du PIB mondial est due dans une large mesure à deux facteurs : une mesure inappropriée du PIB mondial et une faiblesse exceptionnelle de la demande dans la zone euro. Pour mesurer la demande en biens échangeables, le PIB mondial agrégé avec des taux de change du marché est plus adapté que la mesure conventionnelle basée sur des conversions en parité de pouvoir d’achat. De plus, la faiblesse exceptionnelle de la demande dans la zone euro (où l’intensité du commerce est particulièrement forte) a eu un effet négatif substantiel sur les flux intra-zones, qui sont habituellement comptabilisés dans le commerce mondial. Une fois que le PIB mondial est agrégé avec des taux de change de marché et que l’on soustrait les flux intra-zone-euro au commerce mondial, les estimations économétriques suggèrent ainsi que sur les 15 dernières années, l’élasticité de long-terme du commerce au PIB mondial a été similaire à celle des années 90. En effet, la faiblesse du commerce mondial après la crise est essentiellement due à une faiblesse de la demande mondiale plutôt qu’à un changement structurel. Cela est montré par les estimations économétriques de ce papier et également confirmé par l’observation des évolutions de l’investissement mondial, de la fragmentation de la production internationale et du protectionnisme.

Suggested Citation

  • Patrice Ollivaud & Cyrille Schwellnus, 2015. "Does the Post-Crisis Weakness of Global Trade Solely Reflect Weak Demand?," OECD Economics Department Working Papers 1216, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1216-en
    DOI: 10.1787/5js1qvnff3hk-en
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    Cited by:

    1. Aqib Aslam & Emine Boz & Eugenio Cerutti & Marcos Poplawski-Ribeiro & Petia Topalova, 2018. "The Slowdown in Global Trade: A Symptom of a Weak Recovery?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(3), pages 440-479, September.
    2. Simola, Heli, 2021. "Trade collapse during the covid-19 crisis and the role of demand composition," BOFIT Discussion Papers 12/2021, Bank of Finland, Institute for Economies in Transition.
    3. repec:zbw:bofitp:2021_012 is not listed on IDEAS
    4. Gaulier, Guillaume & Sztulman, Aude & Ünal, Deniz, 2020. "Are global value chains receding? The jury is still out. Key findings from the analysis of deflated world trade in parts and components," International Economics, Elsevier, vol. 161(C), pages 219-236.
    5. Yavuz Arslan & Juan Contreras & Nikhil Patel & Chang Shu, 2018. "Globalisation and deglobalisation in emerging market economies: facts and trends," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and deglobalisation, volume 100, pages 1-25, Bank for International Settlements.
    6. Xuefeng Qian & Zhao Liu & Ying Pan, 2017. "China's Trade Slowdown: Cyclical or Structural?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 25(6), pages 65-83, November.
    7. Cabrillac, Bruno & Al-Haschimi, Alexander & Babecká Kucharčuková, Oxana & Borin, Alessandro & Bussière, Matthieu & Cezar, Raphael & Derviz, Alexis & Dimitropoulou, Dimitra & Ferrara, Laurent & Gächter, 2016. "Understanding the weakness in global trade - What is the new normal?," Occasional Paper Series 178, European Central Bank.
    8. Marco Giansoldati & Tullio Gregori, 2018. "Trade Collapses and Trade Slowdowns: Evidence from Some Central and Eastern European Countries," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 16(1 (Spring), pages 3-18.
    9. Döhrn, Roland & Jäger, Philipp & Zwick, Lina, 2016. "Peak Trade? Auswirkungen einer weltwirtschaftlichen Wachstumsverlangsamung auf das Exportland Nordrhein-Westfalen," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 148929.
    10. Jaime Martinez-Martin, 2016. "Breaking down world trade elasticities: a panel ECM approach," Globalization Institute Working Papers 275, Federal Reserve Bank of Dallas.
    11. David Haugh & Alexandre Kopoin & Elena Rusticelli & David Turner & Richard Dutu, 2016. "Cardiac Arrest or Dizzy Spell: Why is World Trade So Weak and What can Policy Do About It?," OECD Economic Policy Papers 18, OECD Publishing.
    12. Roni Frish, 2016. "The Real Exchange Rate in the Long Term," Bank of Israel Working Papers 2016.03, Bank of Israel.
    13. Simola, Heli, 2021. "Trade collapse during the covid-19 crisis and the role of demand composition," BOFIT Discussion Papers 12/2021, Bank of Finland Institute for Emerging Economies (BOFIT).
    14. Carter Mix & George Alessandria, 2017. "The Global Trade Slowdown: A Dynamic Approach," 2017 Meeting Papers 907, Society for Economic Dynamics.
    15. George Alessandria & Carter Mix, 2019. "Trade Policy is Real News: A quantitative analysis of past, current, and future changes in U.S. trade barriers," 2019 Meeting Papers 545, Society for Economic Dynamics.
    16. Simola, Heli, 2021. "The impact of Covid-19 on global value chains," BOFIT Policy Briefs 2/2021, Bank of Finland Institute for Emerging Economies (BOFIT).
    17. Agnes Ghibuțiu, 2017. "Eu And The Challenges Of Rising Global Protectionism," Romanian Economic Business Review, Romanian-American University, vol. 12(1), pages 7-27, March.

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    More about this item

    Keywords

    Commerce mondial; forecasting; prévisions; trade elasticity; élasticité du commerce;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F10 - International Economics - - Trade - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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