Effect of Global Financial Crisis on International Trade in Developed and Developing Countries

The recent global crisis, as a big crash (Baldwin and Simon, 2009), has reduced foreign demand growth affecting total countries’ exports. Given the importance of foreign trade to nations and the reality that recent crisis has affected international trade; we study the effects of the global financial crisis on trade relations between countries by using Ma and Cheng (2003) approach and by applying gravity model to both selected developed and developing countries during 1998-2010. Emprical results have approved negative effects of financial crisis on international trade in the countries under consideration. The result obtained is evident that such incidence seems to be significant to explain a sharp fall in the world exports.