New And Traditional Trade Flows And The Economic Crisis

In terms of economic development, it makes a difference whether export increases at the extensive (new trade flows) or intensive margin (traditional, well-established trade flows). Similarly, a decline in international trade may affect new flows relatively more than traditional ones. A more severe impact on new trade flows could impose additional obstacles to recovery for those countries relying on export diversification for their economic development. This paper seeks to determine whether the recent decline in international trade has affected relatively more trade at the extensive margin or at the intensive margin. The overall results indicate that the economic crisis of 2008 and 2009 has had more severe implications for those bilateral trade flows that did not exist before 2006. New bilateral flows have a lower probability of surviving the fall in demand and relatively higher negative effects on their volumes of trade. Consequently, the economic crisis may also affect the global economy by producing delays in the international product cycle, with traditional and larger exporters holding ground in a relatively better way than new entrants.