Cambridge Business Association
Does the Global Trade Slowdown Matter?
Report

Does the Global Trade Slowdown Matter?

Cristina Constantinescu, Aaditya Mattoo and Michele Ruta
World Bank, 2016
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Editorial Rating

7

Qualities

  • Controversial
  • Analytical
  • Innovative

Recommendation

Global trade boomed during the 20 years leading up to the Great Recession, but it has since fallen so far that it trails the global GDP growth rate. At the same time, trade has become less responsive to changes in GDP, causing some experts to fret that reduced trade could impinge on productivity growth. Economists Cristina Constantinescu, Aaditya Mattoo and Michele Ruta offer a fresh approach to investigating the link between exports and economic growth. Their esoteric analysis may make for painful reading for investors anticipating good news as well as for noneconomists seeking more accessible prose. getAbstract suggests their scholarly report to economists, policy makers, analysts and executives.

Summary

The rate of global trade growth plunged from 7% in the 1987–2007 period to 3% in the 2012–2015 period. While declines in global demand influence the slowdown in trade, the very relationship between global trade and income, expressed as growth in GDP, has also changed. Elasticity, or the responsiveness of global trade to GDP, has fallen since the 1990s.

A mix of cyclical and long-term factors accounts for the deceleration in global trade growth. Since the recession, the demand for imports has shrunk in both developed and emerging economies. Moreover, the rate of trade liberalization...

About the Authors

Cristina Constantinescu, Aaditya Mattoo and Michele Ruta are economists at the World Bank.

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    Y. L. 8 years ago
    The rate of growth just reflects one aspect, also need to consider the base (the base is much larger than 1987–2007 period).