The Great Collapse in Value Added Trade

46 Pages Posted: 21 Jun 2016

See all articles by Arne Nagengast

Arne Nagengast

Deutsche Bundesbank - Economics Department

Robert Stehrer

Vienna Institute of International Economic Studies (WIIW)

Multiple version iconThere are 2 versions of this paper

Date Written: 2015

Abstract

This paper studies the great collapse in value added trade using a structural decomposition analysis. We show that changes in vertical specialisation accounted for almost half of the great trade collapse, while the previous literature on gross trade has mainly focused on final expenditure, inventory adjustment and adverse credit supply conditions. The decline in international production sharing during the crisis may partially account for the observed decrease in global trade elasticities in recent years. Second, we find that the drop in the overall level of demand accounted for roughly a quarter of the decline in value added exports while just under one third was due to compositional changes in final demand. Finally, we demonstrate that the dichotomy between services and manufacturing sectors observed in gross exports during the great trade collapse is not apparent in value added trade data.

Keywords: Great trade collapse, Vertical specialisation, Trade in value added, Input-output tables, Structural decomposition analysis

JEL Classification: F1, F2, C67, R15

Suggested Citation

Nagengast, Arne and Stehrer, Robert, The Great Collapse in Value Added Trade (2015). Bundesbank Discussion Paper No. 47/2015, Available at SSRN: https://ssrn.com/abstract=2797071

Arne Nagengast (Contact Author)

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Robert Stehrer

Vienna Institute of International Economic Studies (WIIW) ( email )

A-1010 Vienna
Austria

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