An Anatomy of Trade in the 2008-09 Crisis

We identify a new set of stylized facts on the 2008-2009 trade collapse using detailed dis-aggregated data for the European Union, Brazil, Indonesia, and the United States. In particular, we decompose the fall in international trade into product entry and exit, price changes, and quantity changes for imports by the European Union and the three countries. When we aggregate across all products, most of the countries analyzed experienced a decline in new products, a rise in product exit, and falls in quantity for product lines that continued to be traded. The evidence suggests that the intensive rather than extensive margin mattered the most, consistent with studies of other countries and previous recessionary periods. On average, quantities declined and prices fell. However, these averages mask enormous differences across different products. Within commodities, prices declined sharply. However, within manufacturing, while most quantity changes were negative, prices generally remained the same or increased. Consequently, within manufacturing, there is some evidence consistent with the hypothesis that supply side frictions played a role. For the United States, price increases were most significant in sectors which are typically credit constrained.