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Title: Trade Prices and the Global Trade Collapse of 2008-2009

Author(s): Gita Gopinath, Oleg Itskhoki and Brent Neiman

Publication Date: September 2012

Keyword(s): Durable Goods, Global Trade Collapse, Great Recession and Import and Export Prices

Programme Area(s): International Macroeconomics and International Trade and Regional Economics

Abstract: We document the behavior of trade prices during the Great Trade Collapse of 2008-2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices.

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Bibliographic Reference

Gopinath, G, Itskhoki, O and Neiman, B. 2012. 'Trade Prices and the Global Trade Collapse of 2008-2009'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9158