Tuesday, May 19, 2009


Less trade for a long period of time, hence greater influence of domestic demand

Apart from cyclical effects, we believe that the weight of international trade will be smaller in the future, because credit-related goods account for a very large proportion of trade, and deleveraging is likely to last for a long period of time.

If the weight of trade is smaller, countries (e.g. Japan and Germany) that had built their strategies around exports to the detriment of domestic demand will be penalised in a lasting manner. But it is very hard to change strategy, even though China is apparently succeeding in doing so.

To see full report: FLASH ECONOMICS