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GTAP Resource #3229

"Trade and Sectoral Impacts of the Financial Crisis: A Dynamic CGE Analysis"
by Walmsley, Terrie and Anna Strutt

The current global financial crisis has resulted in a significant downturn in the global economy, with impacts felt throughout the world. We use a dynamic global general equilibrium model (GDyn, Ianchovinchina and McDougall, 2000) to explore the effects of two economic slowdown scenarios, with a particular focus on trade and sectoral impacts. We include the impact of fiscal stimulus packages and a general decline in global investment. We also explore the potential impacts of using trade policy to respond to the crisis, by investigating the impact on the global economy of moving toward greater protection of domestic industries. In the short and long run, most countries lose as a result of the crisis, as expected. The extent of the declines in the long run depend on the extent to which investment declines in the region and on the extent to which savings declines globally. Globally, our results suggest that under a ‘moderate’ crisis scenario, trade falls by approximately 14 percent from the 2020 baseline. Within this, the composition of trade changes quite markedly, with shifts reflecting changes in demand for construction of investment goods; the increasing longer-term demand from China and India; and at least in the short run, different capital intensities of production in different economies. A more extended crisis or increased protection are both expected to further accentuate global losses. While the more severe crisis adversely impacts all sectors, the increase in tariffs mainly impacts sectors and regions which increase protection significantly.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference Paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2010
Created: Walmsley, T. (4/9/2010)
Updated: Walmsley, T. (4/9/2010)
Visits: 6,764
- Economic growth
- Dynamic modeling
- Asia (East)
- Asia (Southeast)

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