92
Trade Finance during the Great Trade Collapse
Figure 5.2 Merchandise Trade Index, 2007 to mid-2010 250
Index, Jan 2007 = 100
200
150
100
50
Ja
n
M 200 ar 7 M 20 ay 07 2 Ju 007 l2 Se 00 p 7 N 200 ov 7 2 Ja 00 n 7 M 200 ar 8 M 20 ay 08 2 Ju 008 l2 Se 00 p 8 N 200 ov 8 2 Ja 00 n 8 M 200 ar 9 M 200 ay 9 2 Ju 009 l2 Se 00 p 9 N 200 ov 9 2 Ja 00 n 9 M 201 ar 0 20 10
0
industrial countries
emerging countries
developing countries
Sources: IMF staff estimates based on Haver Analytics data and WTO 2010. Note: January 2008 = 100, in U.S. dollars. Trade data on industrial, emerging, and developing countries are based on Haver Analytics reporting of 31, 32, and 20 countries, respectively.
The impact of the increased cost of funds was spread unevenly across the markets, banks, and nonbank financial institutions of advanced and emerging economies. The interest-rate spreads above policy rates rose and fell rapidly in the advanced economies, as shown in figure 5.4, coming close to precrisis levels by January 2009 and dropping below precrisis levels by mid-2009. As for the emerging markets, debt market spreads rose by much larger margins, fell much more gradually, and remained above pre-Lehman levels in the first quarter of 2010, as figure 5.5 illustrates. The disruption to lending correlated with the distance between the borrower and the ultimate holder of the debt. Lending volumes quickly reflected the declining economic activity and the financial shock of the crisis. Loans to nonfinancial firms dropped in the Euro Area and the United States by 1 percent and 14 percent, respectively, between the fourth quarter of 2008 and the third quarter of 2009, as shown in figure 5.6.