Decipher Global Trade Model: The Macroeconomic Policy Implications

Abstract

The purpose of this study is to provide down-to-earth macroeconomic policy implications from the up-to-date estimates of the trade system in the OECD countries. Understanding on the linkages between the world trade mechanism and the macroeconomy is of utmost importance for the post-crisis managements of the world economy. The major points regarding the macroeconomic policy implications are as follows. (1) For the majority of the OECD countries, fiscal expansion is likely to encourage the world trade when it is designed in the way to increase private consumption, in fact, only in a few countries fiscal expansion can increase the world trade volumes in its own right. (2) Currency depreciation might be an attractive policy option for improving trade balances in the cases of the 9 OECD countries. (3) There is a clear evidence of pricing-to-market with cross-country diversity, implying that import or domestic price robustness from the external forces.