Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316509 
Year of Publication: 
2016
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 20 [Issue:] 3 [Year:] 2016 [Pages:] 339-363
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
This paper analyzes why the global financial crisis in 2008 severely affected Asia's trade. Asia has been suffering from the falls in export demand from developed countries. However the abrupt trade declines in Asia are not fully explained by reactions to this as in previous experiences. The question is why the financial crisis in 2008 brought about the abrupt and deep collapse in world trade, while other world-wide recessions had more moderate effects on world trade. This paper shows that the dynamic relationship between trade and trade finance is one important factor in explaining this question. This paper also applies the Granger (causality) test to uncover different relationships in the developed and developing economies and show different results for different countries in Asia. We employ a Markov-Switching FAVAR (Factor Augmented VAR) to show that global liquidity shocks are important factors in explaining the huge and abrupt trade drops in Asia.
Subjects: 
Trade Finance
Global Liquidity
Markov-Switching Factor Augmented VAR
JEL: 
F19
F39
G01
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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