Date Added: Mar 2011
Global and U.S. trade declined dramatically in the wake of the global financial crisis in late 2008 and early 2009. The subsequent recovery in trade, while vigorous at first, gradually lost momentum in 2010. Against this backdrop, this paper explores the prospects for global and U.S. trade in the medium term. The authors develop a unified empirical framework - an error correction model - that exploits the cointegrating relationship between trade and economic activity. The model allows them to juxtapose several scenarios with different assumptions about the strength of GDP growth going forward and the relationship between trade and economic activity.