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DECTI Trade Seminar: Do Crises Have Lasting Effects on Trade?

 
Location:   MC5-500
Begins:   Oct 05, 2010 12:30
Ends:   Oct 05, 2010 14:00
Contact Person:   Yasmin D Souza

Speaker: Prachi Mishra, IMF

(joint with Abdul Abiad and Petia Topalova)

Abstract:  We explore country-level trade dynamics following past episodes of banking and debt crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we find that there is a sharp decline in a country’s imports in the year following a crisis - 19 percent, on average - and this decline is persistent, with imports remaining 13 percent below predicted, 5 years after the crisis. This is in addition to any import compression due to lower output, which the gravity model already controls for. In contrast, exports of the crisis country are not as adversely affected, and they remain close to the predicted level in both the short and medium-term.




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