Changes in international trade flows and world prices are major channels through which the global financial crisis hits developing countries. How these trade shocks and terms-of-trade trends affect economic performance and welfare in low-income countries depends on country-specific characteristics, especially initial trade patterns.
The project uses a global trade model to gauge the impact of a slowdown in economic activity in the OECD on trade performance, world prices, and aggregate welfare in the rest of the world – with a particular focus on the least developed countries in sub-Saharan Africa and Asia. The analysis also indicates the amount of external assistance that would be required to compensate adversely affected countries for the trade-related crisis impacts.
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