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CF weekly workshop - Anna Watson

When May 03, 2011
from 05:00 PM to 06:00 PM
Where Winstanley Lecture Theatre, Trinity College
Contact Name
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Anna Watson (Faculty of Economics)

Title: Financial Frictions, the Great Trade Collapse and International Trade over the Business Cycle

This paper investigates the impact of financial frictions on the dynamics of trade over the business cycle and their role in the great trade collapse of 2008-2009. The study introduces a financial accelerator into an open-economy general equilibrium model with heterogenous firms in which international trade is more dependent on external finance than domestic sales. The analysis demonstrates that endogenously driven countercyclical changes in the external finance premium amplify the effects of real and financial shocks on trade and help to explain the procyclicality of trade to GDP ratio as well as the decline in trade during the recent financial crisis.

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