Document Type

Article

Publication Date

10-2016

Journal Title

Journal of Economics, Business and Management

Volume

4

Issue

10

Abstract

Many studies link the recent collapse in trade during the 2008-09 financial crisis to a decrease in the demand for durable and investment goods in crisis-hit countries. Thus, a remarkable feature of the recent collapse in international trade is that China’s export sectors – for which the crisis-hit U.S. and Europe are the primary destinations – appear much less affected than their counterparts in other exporting countries. This paper explains the puzzle by documenting a new stylized fact: China’s processing exports fell much less than ordinary trade during the 2008-09 financial crisis, even conditioning on industry and demand in the destination country. It then investigates a range of explanations for the special behavior of processing trade.

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