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Erik Frohm

Economics

Division: Euro Area External Sector
Current Position: Senior Economist
Fields of interest: Macroeconomics and Monetary Economics,International Economics,Other Special Topics
Email: Erik.Frohm@ecb.europa.eu

Biography

Education: 2011
MSc in Economics, Umeå university, Umeå, Sweden
Professional experience: 2021-
Senor Economist - Euro Area External Sector Division, Directorate General Economics, European Central Bank; 2018-2021
Senior Economist - Applied Research Division, Monetary Policy Department, Sveriges Riksbank; 2015-2018
Economist - Output and Demand Division, Directorate General Economics, European Central Bank; 2012-2015
Economist - Statistics Division, Monetary Policy Department, Sveriges Riksbank; 2011-2012
Economic Analyst - Department 4, Swedish Competition Authority

ECB publications

14 June 2022

THE INTERNATIONAL ROLE OF THE EURO - BOX

How important is invoicing currency choice for the impact of exchange rate fluctuations on trade?

The international role of the euro 2022

English

23 September 2021

ECONOMIC BULLETIN - BOX

The impact of supply bottlenecks on trade

Economic Bulletin Issue 6, 2021

English

Abstract: This box documents recent transport and input-related bottlenecks in global trade and shows how euro area countries have been particularly affected. An empirical analysis assesses the impact of supply bottlenecks on global and euro area export growth and estimates the cumulated shortfall for the level of goods exports to be 6.7% for the euro area and 2.3% for the rest of the world.
JEL Code: F10 : International Economics→Trade→General
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

2 August 2021

WORKING PAPER SERIES - No. 2580

Dominant currencies and the export supply channel

Erik Frohm

English

Abstract: Dominant currency pricing (DCP) weakens the demand-side effects of exchange rate changes on exports (Gopinath et al., 2020). However, adjustment in the export sector can still occur through other supply-side channels. With bilateral trade data at the HS2-product level, panel fixed-effects regressions and an instrumental variables (IV) approach, this paper presents several novel findings: (1), a depreciation of an exporter’s currency against the US-dollar increases total export volumes between non-US countries, whereas bilateral exchange rates matter very little. (2), there is no statistically significant increase in average exports per firm (the intensive margin), while the aggregate export response is mainly driven by an increase in the number of exporting firms (the extensive margin). (3), there is substantial heterogeneity in the export response to exchange rates against dominant currencies. Market concentration, approximated by the Herfindahl-Hirschman Index (HHI), reduces the response of both the extensive and intensive margins to the US-dollar exchange rate. These results highlight an “export supply channel” of exchange rates in a world with dominant currencies, deepen our understanding of aggregate export adjustment and further underline the heterogeneous export response in different sectors to exchange rate changes.
JEL Code: F14 : International Economics→Trade→Empirical Studies of Trade
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

28 July 2021

WORKING PAPER SERIES - No. 2576

Labour shortages and wage growth

Erik Frohm

English

Abstract: Tight labour markets are usually accompanied by mounting wage pressures. Yet, in the past decade, wage growth has remained subdued despite the appearance of widespread labour shortages. This paper re-examines labour market conditions since 2007 through the lens of a novel indicator, relative labour shortages (RLS), based on data from a large representative business survey in Sweden. Four main results emerge from the analysis: (1), the time-series average of RLS suggested much weaker labour market conditions during the 2013–2019 recovery from the Great Recession and during the Covid-19 pandemic in 2020 than qualitative surveys or the vacancy-unemployment ratio. (2), the reason is that RLS contains a time-varying intensive margin of labour shortages not recorded in most surveys, which has been trending downwards since the Great Recession. (3), fixed-effects regressions with several aggregate-, sector, region and establishment-level controls confirm that RLS is strongly and positively correlated with annual wage growth at the establishment level. (4), sector-level wage Phillips curves show that the subdued level of RLS can help explain the sluggish wage growth in Sweden since the Great Recession.
JEL Code: C80 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials

24 June 2021

ECONOMIC BULLETIN - BOX

The semiconductor shortage and its implication for euro area trade, production and prices

Economic Bulletin Issue 4, 2021

English

Abstract: This box documents the misalignment between the surge in global demand for semiconductors and their limited global supply. The semiconductor chip shortage poses constraints on euro area manufacturers, particularly in industries relying on semiconductors, such as the computer, electronic, electrical equipment and automotive industries. So far, there is only limited evidence regarding the effects of the shortage of semiconductors on euro area price pressures.
JEL Code: F10 : International Economics→Trade→General
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

15 May 2020

WORKING PAPER SERIES - No. 2410

Global trade in final goods and intermediate inputs: impact of FTAs and reduced “Border Effects”

English

Abstract: International trade in manufacturing goods has risen strongly over the past decades, contributing to the expansion of global value chains (GVCs). This paper studies how two factors contributed to this rise since 1970: (i) declining “border effects” that are arguably related to the ICT revolution that started around 1985, and (ii) the implementation of Free Trade Agreements that have gotten deeper over time. We take advantage of the identification of the time dimension in a panel setting to capture the emergence of GVCs by disentangling domestic and international trade in final goods and intermediate inputs. According to our results, diminished border effects account for the bulk of the increase in international trade in manufactured goods. The cost of a national border is estimated to have fallen by around 10% per year for total manufacturing trade since the 1970s. The decline has been 13% per year for exports of final goods and 8% for intermediate inputs, highlighting the importance of reduced border effects for enabling international trade in the age of GVCs. Moreover, we show that it is important to control for different border effects for final goods and intermediate inputs when estimating the trade impact of FTAs in gravity equations. With this enhancement, our results suggest that FTAs increase trade by 54% after ten years. We also find evidence that FTAs that are more recent have a greater trade effect than those signed in earlier periods.
JEL Code: F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business

30 April 2019

OCCASIONAL PAPER SERIES - No. 221

The impact of global value chains on the euro area economy

English

Abstract: The studies summarised in this paper focus on the economic implications of euro area firms’ participation in global value chains (GVCs). They show how, and to what extent, a large set of economic variables and inter-linkages have been affected by international production sharing. The core conclusion is that GVC participation has major implications for the euro area economy. Consequently, there is a case for making adjustments to standard macroeconomic analysis and forecasting for the euro area, taking due account of data availability and constraints.
JEL Code: F6 : International Economics→Economic Impacts of Globalization
F10 : International Economics→Trade→General
F14 : International Economics→Trade→Empirical Studies of Trade
F16 : International Economics→Trade→Trade and Labor Market Interactions
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles

17 May 2017

WORKING PAPER SERIES - No. 2064

Sectoral interlinkages in global value chains: spillovers and network effects

English

Abstract: This paper studies the role of global input-output linkages in transmitting economic disturbances in the international economy. Our empirical results suggest that these sectoral spillovers are both statistically significant and of economic importance. We also provide evidence that it is not the interlinkages per se that matter for the international transmission but rather the presence of global hub sectors that are either large suppliers or purchasers of other sectors' inputs. When the links between these sectors and the rest of the global value chain are severed, the spillovers diminish strongly and eventually become statistically insignificant. This highlights the importance of the structure of the network for enabling spillovers and the prominent role played by hub sectors in the global economy.
JEL Code: E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts

External publications

2021

The World Economy

Reduced “Border Effects", FTAs and International Trade