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Mr. Brad J. McDonald and Christian Henn
This paper investigates how trade flows are being affected by new discriminatory measures implemented during the global financial crisis. We match data on behind-the-border measures (e.g., bailouts and subsidies) and border measures implemented through April 2010 to monthly HS 4-digit bilateral trade data. Our estimation strategy relies on a first-differenced gravity equation and time-varying fixed effects to disentangle the impact of new discriminatory measures. Trade in exporter-importer pairs subject to new measures decreased by 5 to 8 percent relative to trade in the same product among pairs not subject to new measures. These product-level results imply global trade declines at the aggregate level of about 0.2 percent, or $30-35 billion a year. These aggregate figures would be higher, if one third of measures had not been excluded due to incomplete data. The paper then goes on to dissect protectionism’s trade impact by disaggregating measures by type, advanced/developing countries, regions, sectors, and time. Behind-the-border measures are found to have been more harmful than border measures at the product level. Among border measures, impacts tend to be higher for less transparent measures. Advanced countries are found to be responsible for 2/3 of the trade decline due to crisis protectionism, but their exports also absorbed 2/3 of this decline. When breaking down measures in a time dimension, we find that those taken in the first nine months after the Lehman collapse were most harmful and likely continue to constitute a drag on trade.
Mr. Timothy Geithner

more insurance against future risk. These help limit the moral hazard risk in operating with a strong standing arsenal of Bagehot-type emergency authorities. They can’t remove the fundamental conflict in a crisis between imperatives of mitigating crisis damage and limiting moral hazard risk, because actions that seem sensible in terms of future incentives tend to exacerbate panics. The alternative approach of locking the doors of the fire station is dangerous if the limits are credible, and since they are generally not credible, it leaves you with the worst of

Mr. Timothy Geithner


The choices we make in advance of the next financial crisis will have a major impact in determining the magnitude of the economic damage. Our vulnerability to crisis depends on the strength of the protections we build into the financial system through prudential regulation, as well as on the degrees of freedom we create for ourselves to respond to the unanticipated, and the knowledge and experience we bring in managing crises. Is the financial system safer today? With the reforms now in place and with the memory of the crisis still fresh, how confident should we feel about the resilience of the financial system and our ability to protect the US economy from a major financial crisis? Warburg Pincus President and former US Secretary of the Treasury Timothy Geithner attempts to answer these questions in his October 2016 Per Jacobsson Lecture.

Mr. James Roaf, Mr. Ruben V Atoyan, Mr. Bikas Joshi, and Mr. Krzysztof Krogulski

2010 and early 2011, with the rebounds tending to be strongest in the countries that had seen the largest output falls in 2009—notably the Baltic and CIS countries. 5 But a range of factors increasingly took their toll. The lingering effects of weak private and public balance sheets, along with the emerging euro area crisis, damaged growth through financial sector retrenchment and withdrawal of fiscal stimulus (as discussed in Chapters IX and XI ) as well as effects on confidence, investment and trading partner demand. The result was a marked slowdown in growth

International Monetary Fund. Research Dept.

It Going? Felman, Joshua; Gray, Simon; Goswami, Mangal; Jobst, Andreas; Pradhan, Mahmood; Peiris, Shanaka J.; Seneviratne, Dulani Working Paper 11/138 Global and Regional Spillovers to GCC Equity Markets Saadi Sedik, Tahsin; Williams, Oral Working Paper 11/139 Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade Henn, Christian; McDonald, Bradley J. Working Paper 11/140 Euro Area Export Performance and Competitiveness Bayoumi, Tamim; Harmsen, Richard T.; Turunen, Jarkko Working Paper 11

International Monetary Fund. Research Dept.

Responses to the Crisis: Damage Observed in Product-Level Trade ,” IMF Working Paper 08/139 ( Washington : International Monetary Fund ). Ricci , L. , and F. Trionfetti , 2011 , “ Evidence on Productivity, Comparative Advantage, and Networks in the Export Performance of Firms ,” IMF Working Paper 08/77 ( Washington : International Monetary Fund ). Romeu , R. , 2008 , “ Vacation Over: Implications for the Caribbean of Opening U.S.-Cuba Tourism ,” IMF Working Paper 08/162 ( Washington : International Monetary Fund ). Romeu , R. , and A

Bernard Hoekman

Cui , 2011 , “ Determinants of Trade Policy Responses to the 2008 Financial Crisis ,” Policy Research Working Paper 5862 ( Washington : World Bank ). Henn , Christian , and Brad McDonald , 2011 , “ Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade ,” IMF Working Paper 11/139 ( Washington : International Monetary Fund ). Kee , Hiau Looi , Cristina Neagu , and Alessandro Nicita , 2010 , “ Is protectionism on the Rise? Assessing National Trade Policies during the Crisis of 2008 ,” Policy Research Working

International Monetary Fund

opportunities. Conclusion Cote d’Ivoire’s post-election crisis momentarily ruined the hopes of full economic recovery and the benefits of the HIPC completion point expected for mid-2011. The amount of damage caused to the economy and to the country’s fundamentals is yet to be assessed. In the face of daunting challenges, my authorities have taken steps to restore law and order and operations of public administration. Amid an environment of conflicting goals of raising revenue while supporting crisis-damaged enterprises, the authorities have unveiled a budget which