Why Did Trade Plummet in the Great Recession?

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International Trade

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Why Did Trade Plummet in the Great Recession?

Why did trade fall so fast during the recent Great Recession? Global trade fell 30% between 2008-2009. One reason is that trade in durable goods — like cars — fell much faster than trade in non-durable goods — like food and other perishables. Non-durable goods are easier to produce than durable goods, and can be produced in many parts of the world. And, it's easy to postpone spending on durable goods — for example, repair your existing car instead of buying a new one. Other reasons for the fall in trade have to do with the prices of differentiated and undifferentiated goods and a contraction in credit. The good news presented in the video is that trade recovered rapidly in 2009-2010 and represented one of the first areas where the global economy saw systematic recovery.

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