This research paper provides a causality assessment on the linkage between declines in world trade finance and the world trade collapse in the period following the Financial Crisis of 2008 and 2009 as well as the ensuing global trade slowdown. The paper performs Granger Causality tests on two time series: World trade (volume data acquired from the CPB World Trade Monitor) and World trade finance (transaction data acquired from SWIFT), using global monthly data from January 2007 to May 2017. In the short run, Granger causality always runs one-way from world trade finance to world trade. We always find two-way Granger causality for lags longer than two years. Importantly Granger causality never runs one-way from world trade to world trade finance. Given the short-term nature of trade finance, we conclude that world trade finance Granger-causes world trade.

Additional Metadata
Keywords world trade, world trade collapse, world trade slow-down, trade finance, Granger causality, financial crisis, SWIFT
JEL Trade: General (jel F10), International Lending and Debt Problems (jel F34), Macroeconomic Aspects of International Trade and Finance: General (jel F40), Finance (jel F65), Financial Crises (jel G01), Banks; Other Depository Institutions; Mortgages (jel G21)
Publisher International Institute of Social Studies of Erasmus University (ISS)
Persistent URL hdl.handle.net/1765/104224
Series ISS Working Papers - General Series
Journal ISS Working Paper Series / General Series
Citation
Đào, T.K, & van Bergeijk, P.A.G. (2018). Global trade finance, trade collapse and trade slowdown: a Granger causality analysis (No. 634). ISS Working Paper Series / General Series (Vol. 634, pp. 1–21). International Institute of Social Studies of Erasmus University (ISS). Retrieved from http://hdl.handle.net/1765/104224