Trade and the global recession

Jonathan Eaton, Samuel Kortum, Brent Neiman, John Romalis

Research output: Contribution to journalArticlepeer-review

164 Citations (Scopus)


We develop a dynamic multicountry general equilibrium model to investigate forces acting on the global economy during the Great Recession and ensuing recovery. Our multisector framework accounts completely for countries' trade, investment, production, and GDPs in terms of different sets of shocks. Applying the model to 21 countries, we investigate the 29 percent drop in world trade in manufactures during the period 2008-2009. A shift in final spending away from tradable sectors, largely caused by declines in durables investment efficiency, accounts for most of the collapse in trade relative to GDP. Shocks to trade frictions, productivity, and demand play minor roles. (JEL E3, F1, F4).

Original languageEnglish
Pages (from-to)3401-3438
Number of pages38
JournalAmerican Economic Review
Issue number11
Publication statusPublished - Nov 2016
Externally publishedYes


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