ABSTRACT
The onset of the subprime crisis has triggeredwhat has been labeled the first global recession in decades. According to virtually any definition, most countries entered recession between the third quarter of 2008 (2008Q3) and 2009Q2. World trade has collapsed, thoughwhether it happened as a cause or a consequence of the crisis is an open question. Far from dampening the effect on consumption of business cycle fluctuations, international financial linkages are often accused of having accelerated the international diffusion of the shock. International capital is being withdrawn as financial intermediaries deleverage their balance sheets, which is often argued to have worsened the consequences of the crisis, especially in the developing world.
