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The great trade collapse and Indian firms

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  • Pavel Chakraborty

Abstract

The collapse in global trade during the 2008–09 crisis has been widely studied using the developed nation(s) data. I use firm†level data from Indian manufacturers to show that: (a) Indian firms experience strong negative demand shocks concerning their exports to the USA and the EU, the effect being significantly higher in case of the USA. Results assert that 1% increase in the exposure towards the crisis†affected zones (the USA and the EU combined) reduces an average Indian manufacturing firm's export earnings by 1.17%–1.36%; (b) trade in consumer non†durables and durables are the two most affected sectors, impact being higher for the latter; (c) evidence in support of similar effects throughout the size distribution of firms, with the effect being highest for small or the most vulnerable firms; (d) drop in demand, as a result of the 2008–09 crisis, only affects the high†exposure industries. My results are robust to IV analysis and a variety of checks.

Suggested Citation

  • Pavel Chakraborty, 2018. "The great trade collapse and Indian firms," The World Economy, Wiley Blackwell, vol. 41(1), pages 100-125, January.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:1:p:100-125
    DOI: 10.1111/twec.12517
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    Cited by:

    1. Chada, Swechha & Saravanan, Palanisamy & Varadharajan, Gopal, 2024. "Socioemotional wealth and cash flow sensitivity of cash: Evidence from India," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    2. Pavel Chakraborty, 2024. "Bank ownership and firm performance," Economica, London School of Economics and Political Science, vol. 91(361), pages 238-267, January.

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