Arm's-Length Trade
Trade growth has slowed sharply since the global financial crisis. U.S. trade data highlights that arm's-length trade —trade between unaffiliated firms—accounts disproportionately for the overall post-crisis trade slowdown. This is partly because arm's-length trade depends more heavily than intra-firm trade on emerging market and developing economies (EMDEs), where output growth has slowed sharply from elevated pre-crisis rates, and on sectors with rapid pre-crisis growth that boosted arm's-length trade pre-crisis but that have languished post-crisis. Compounding such compositional effects, arm's-length trade is also more sensitive to changes in demand and real exchange rates. For example, the income elasticity of arm's-length exports is about one-fifth higher than that of intra-firm exports. Hence, post-crisis global growth weakness has weighed more on arm's-length trade than on intra-firm trade. Unaffiliated firms may also have been hindered more than multinational firms by constrained access to finance during the crisis, heightened policy uncertainty, and their typical firm-level characteristics.
| Main Authors: | , |
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| Format: | Working Paper biblioteca |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017-07
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| Subjects: | TRADE, INTRA-FIRM TRADE, MULTINATIONAL CORPORATIONS, SLOWDOWN, |
| Online Access: | http://documents.worldbank.org/curated/en/659891499793795498/Arms-length-trade-a-source-of-post-crisis-trade-weakness https://hdl.handle.net/10986/27647 |
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