The Collapse of Global Trade: What a Tangled Web We Weave

Spehar, Ann / AOS (2010): The Collapse of Global Trade: What a Tangled Web We Weave. Forthcoming in: World Economics Journal , Vol. 11, No. 3

Abstract

A unique feature of the financial crisis is the unprecedented collapse in global world trade. The objective of this paper is to explain some of that collapse as a move toward protectionism triggered not by nationalistic interests but by ‘competing’ objectives among trading partners from the Mundell-Fleming Trilemma. Even with the best of intentions, efforts toward internal re-balancing necessarily implies harming your trading partner unintentionally if they should be using conflicting policy objectives of the Trilemma. National interests are at odds between two such countries and their policy prescriptions counteract, and paralyze re balancing and coordination efforts between nations. Policymakers may be forced into protectionists’ stances in an effort to counteract the internal re-balancing efforts of their neighbors.

• Item Type: MPRA Paper
• Language: English
• Keywords: International Trade; Financial Crisis; Global Trade Collapse
• Subjects: F - International Economics > F0 - General; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F59 - Other; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F51 - International Conflicts ; Negotiations ; Sanctions; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission; F - International Economics > F1 - Trade > F15 - Economic Integration; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; F - International Economics > F0 - General > F02 - International Economic Order and Integration; F - International Economics > F0 - General > F01 - Global Outlook; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination

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