The Spanish interregional trade collapse

Abstract

After a period of economic expansion, lasting from 2000 to 2007, where both Spanish GDP and interregional trade volume were growing at high rates, an economic contraction occurred affecting the majority of countries in the world, including Spain. This led to the greatest and quickest trade collapse ever seen. This paper analyzes data for 16 Spanish industry sectors for 14 years (2000-2013), comparing the effects of the crisis on trade within Spain with the effects observed by other papers at a global scale. The results of this study confirm the existence of a Spanish internal trade collapse, showing a 23% drop in interregional trade, exceeding the fall in Spanish GDP, -3.6%, by a factor of 6. These findings are supported by the estimation of a Gravity Model of trade in order to determine which factors influence trade between Comunidades Autónomas. We also examine the alleged causes of the Great Trade Collapse and their applicability to the Spanish case. All in all, the reduction in consumption, investment and credit concession to private sector are the main determinants of the Spanish Trade Collapse.