In summary, estimates presented in this note suggest that the combination of zero net private capital flows to emerging markets and a domestic banking crisis could lower import volume growth by between 5 and 6 percent on impact (consistent with earlier work at the Fund) , with a slightly lower effect on export volumes.
These results support the view that general credit market conditions, including for working capital and long-term investment financing, as well as trade finance, have an important impact on international trade over and above the concurrent impact on foreign and domestic output. Although significant, the impact is less than suggested by anecdotal evidence in the current global financial crisis.
