WORLD TRADE REPORT 2014

Professor: OH, Joon Seok

Presenter: KUY, Daranita

Part E: Increased Synchronization and Globalization of Macroeconomic Shocks

Content: Macroeconomic Volatility of Developing

Countries Developing economies in the 2008-09 crisis Trade Policy reaction to the crisis

I. Macroeconomic Volatility of Developing Countries

Defined as volatility in the cyclical component of GDP Reduce growth Worsen income inequality

The sources of this volatility in developing countries: Domestic factors External factors (openness of a country to

trade and its integration with the global economy)

Trade Openness and volatility (+) Global Value Chain was highlighted in

the transmission of macroeconomic shocks - Bullwhip Effect

Trade Openness and volatility (-) A source of diversification, multiple

trading partners small demand shocks Export structure matters

Declining volatility over time

All the developing countries show higher volatility than OECD members but there is a clear download trend for all the groupings beginning around 1995

II. Developing economies in the 2008-09 crisis:

Global Trade has been the transmission belt Dependency of development between developing and developed countries

Developing economies have been primarily affected by the contraction of Trade Finance.

Reassessment by global bank

Stop financing facilities

Shortages of trade finance

Developing economies are part of the policy response leads to faster recovery

III. Trade Policy reaction to the crisis:

(a) Trade policy response: Trade-restrictive measures Trade-opening measures

(b) Coordinated macroeconomic response(c) No increase in trade protectionism

(a) Trade Policy ResponseTrade-restrictive measure:

(a) Trade Policy ResponseTrade-opening or Liberalization measures

Trade-Restricted and Opening Trade

• Developed G-20 countries (Trade remedy)

• G-20 developing countries (import duties, customs procedure)

(a) Trade Policy Response Developed

G20 Countries

Developing

(b) Coordinated macroeconomic response

The fiscal policy: Enormous assistance give to the financial sector and some manufacturing industries (e.g. the auto industry)

The monetary policy: Response to crisis more pronounced on developed countries, short-term interest rates were reduced

(c) No increase in trade protectionism:

Government gain more by sticking to trade agreement Policy instrument better suited to managing the failing

demand Spread of Global Value Chains increase linkages among

countries Raising trade-barriers would have proven to be ineffective

in promoting economic recovery

Summary:

THANK YOU!