Unpacking services trade during the Great Trade Collapse: time series evidence for the US
Author: Ceglowski, Janet
Source: REVIEW OF WORLD ECONOMICS, 153 (3):457-486; 10.1007/s10290-016-0274-9 AUG 2017
Abstract: This study investigates the apparent resilience of services trade during the 2008-2009 global recession by analyzing the time-series behavior of aggregate US services exports and imports over 1987-2014. It finds evidence of structural instability in the long-run trade equations but little evidence it is coincident with the global recession. It also uncovers a distinct pattern in the income elasticity of business services trade: a large long-run value but a significantly smaller short-run value. Combined with its large weight in total US services trade, the limited short-run demand response of business services trade dampened the effect of the economic downturn on aggregate services trade. Far from being an anomaly, the response of US services trade to the 2008-2009 global recession was consistent with its time-series and compositional characteristics.