Description: The Potential Impact of the Global Financial Crisis on World Trade

The Potential Impact of the Global Financial Crisis on World Trade

This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households and international investors in a global economic model. The model has six sectors of producti...

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Bibliographic Details
Main Authors:	McKibbin, Warwick J., Stoeckel, Andrew
Language:	English
Published:	2012
Subjects:	ACCOUNTING ADVANCED ECONOMIES ADVERSE EFFECT AGGREGATE SUPPLY AGRICULTURE AMOUNT OF CAPITAL ARBITRAGE ASSET PRICE ASSET PRICES ASSET VALUATION BAILOUTS BALANCE SHEETS BANK BORROWING BANK GOVERNORS BANK LENDING BANK OPERATIONS BANKING SYSTEMS BANKRUPTCY BASIS POINTS BENCHMARK BOND SPREADS BOND YIELDS BONDS BUDGET CONSTRAINT CAPITAL ACCUMULATION CAPITAL FLOW CAPITAL FLOWS CAPITAL RAISING CAPITAL STOCK CARBON EMISSIONS CASH TRANSFERS CENTRAL BANK CENTRAL BANK GOVERNORS CENTRAL BANKS COMMODITY COMMODITY PRICE COMMODITY PRICES CONSUMER LOANS CONSUMERS CORPORATE BONDS CORPORATE TAX COST OF CAPITAL CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT SURPLUSES DEBT DEFAULTS DEFLATION DEPOSITS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIRECT PAYMENTS DISCOUNT RATES DISPOSABLE INCOME DOMESTIC BANKS DOMESTIC ECONOMY DRIVERS DURABLE DURABLE GOOD DURABLE GOODS DURABLES ECONOMIC GROWTH ECONOMIC OUTLOOK ECONOMIC RECOVERY ELASTICITY EQUILIBRIUM EQUITIES EQUITY PRICES EXCHANGE RATE EXPANSIONARY FISCAL POLICY EXPECTED RETURNS EXPENDITURE EXPORTS FAIR VALUE FEDERAL RESERVE FINANCIAL ASSETS FINANCIAL CAPITAL FINANCIAL CRISIS FINANCIAL FLOWS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL REGULATION FINANCIAL RISK FINANCIAL SECTOR FINANCIAL SHOCK FINANCIAL STABILITY FISCAL CONSOLIDATION FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICY FORECASTS FOREIGN BANK FOREIGN CAPITAL FOREIGN EXCHANGE FREE BOND FUTURE EARNINGS FUTURE LABOR GDP GDP PER CAPITA GENERAL EQUILIBRIUM GLOBAL CAPITAL GLOBAL CAPITAL FLOWS GLOBAL ECONOMY GLOBAL TRADE GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT DEBT GOVERNMENT DEFICITS GOVERNMENT INVESTMENT GOVERNMENT SPENDING GROWTH RATE GROWTH RATES HOLDING HOUSEHOLD INCOME HOUSEHOLD WEALTH HOUSING HOUSING FINANCE INCOME INCOME EFFECT INCOME ELASTICITY INCOME TAX INCOMES INDUSTRIAL ECONOMIES INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENT INFRASTRUCTURE PROJECTS INSTRUMENT INSURANCE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL INVESTORS INTERNATIONAL TRADE INVENTORIES INVENTORY INVESTING INVESTMENT DECISION INVESTMENT DECISIONS INVESTMENT INCOME LABOR MARKET LAWS LDCS LEGISLATION LENDERS LEVEL OF INTEREST RATES LIQUIDITY LOAN LOCAL GOVERNMENTS LOSS OF CONFIDENCE LOW INTEREST RATES MACROECONOMIC ANALYSIS MACROECONOMICS MARGINAL PRODUCT MARKET VALUATION MARKET VALUE MARKET VALUES MINIMUM WAGE MONETARY AUTHORITIES MONETARY POLICY MORTGAGE MORTGAGE MARKET MORTGAGE MARKETS NET EXPORTS NOMINAL INTEREST RATE NOMINAL INTEREST RATES OPEN ECONOMIES OPTIMIZATION OUTPUT GAP PARTICULAR COUNTRY PENSION PENSION FUNDS PERSONAL INCOME POLICY RESPONSE POLICY RESPONSES POSITIVE EFFECTS POTENTIAL OUTPUT PRICE CHANGES PRIVATE INVESTMENT PRODUCTION FUNCTION PRODUCTIVITY PRODUCTIVITY GROWTH PROTECTIONISM PUBLIC POLICY PUBLIC SPENDING RAPID GROWTH RATE OF RETURN RATE OF RETURN TO CAPITAL RATES OF INTEREST RATES OF RETURN REAL EXCHANGE RATE REAL EXCHANGE RATES REAL GDP REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES RECESSION REGULATORY OVERSIGHT RESERVES RISK PREMIUM RISK PREMIUMS RURAL INFRASTRUCTURE SAVINGS SEWAGE SHORT TERM INTEREST RATES SMALL INVESTORS SOFT LOANS STOCK MARKET STOCK MARKETS STOCKS TAX TAX BREAKS TAX EXEMPTION TAX RATES TAX STRUCTURES TELECOMMUNICATIONS TRADE BALANCE TRADE BALANCES TRADE CREDIT TRADE FINANCE TRADE FLOWS TRADE POLICY TRADE PROTECTION TRADES TREASURIES TREASURY TREASURY BOND TREASURY BOND YIELD TRUSTEES UNDERWRITERS UNEMPLOYMENT WAGE RIGIDITY WEALTH WEALTH EFFECTS WORLD ECONOMIES WORLD ECONOMY WORLD FINANCIAL MARKETS WORLD TRADE WTO
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091118083139 http://hdl.handle.net/10986/4326

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Summary:	This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households and international investors in a global economic model. The model has six sectors of production and trade in 15 major economies and regions. The paper shows that the shocks observed in financial markets can be used to generate the severe economic contraction in global trade and production experienced in 2009. In particular the distinction between the production and trade of durable and non durable goods plays a key role in explaining the much larger contraction in trade than GDP experienced by most economies. The paper explores the implications of the large increase in fiscal deficits and the implications of a global trade war in response to the financial crisis.

The Potential Impact of the Global Financial Crisis on World Trade

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