Niet beschikbaar in het Nederlands
Peonare Caka
- 19 December 2024
- OCCASIONAL PAPER SERIES - No. 365Details
- Abstract
- In light of recent global economic and geopolitical shocks threatening trade openness, this report aims to shed light on geoeconomic fragmentation and develops a rich set of new tools to assess its economic effects and implications for central banks. The report shows that, although global trade integration has largely withstood recent disruptions and the rise of inward-looking policies, selective decoupling between few trading partners (United States vis-à-vis China, western economies vis-à-vis Russia) and for specific products (such as advanced technologies) is occurring. Survey data show that, although European firms are reorganising supply chains critical foreign dependencies persist. A firm-level stress test reveals that sudden disruptions in the supply of critical inputs from high-risk countries would lead to significant, albeit very heterogeneous, economic losses across firms, regions and sectors. Addressing foreign dependencies with broad-based protectionism policies, however, is self-defeating. In an extreme counterfactual scenario involving prohibitive and across-the-board trade barriers between geopolitical blocs, global GDP could decline by up to 9% coupled with an increase in global inflation of 4 percentage points in the first year, with the impact persisting for at least five years. It is conceivable that trade fragmentation will unravel over the course of a number of years, with supply disruptions becoming more frequent and severe than in the past. If this process should ultimately lead to a less interconnected global economy, countries might suffer from increased volatility and price pressures, as shocks cannot be easily diversified away through trade. [...]
- JEL Code
- F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F51 : International Economics→International Relations, National Security, and International Political Economy→International Conflicts, Negotiations, Sanctions
F52 : International Economics→International Relations, National Security, and International Political Economy→National Security, Economic Nationalism
F61 : International Economics→Economic Impacts of Globalization→Microeconomic Impacts
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
- 21 October 2024
- WORKING PAPER SERIES - No. 2992Details
- Abstract
- We study how disruptions to the supply of foreign critical inputs (FCIs) —that is, inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products, or which are key to the green transition —might affect value added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how much geoeconomic fragmentation might affect European economies differently. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with similar geopolitical orientations would result in sizable losses of value added with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs.
- JEL Code
- F10 : International Economics→Trade→General
F14 : International Economics→Trade→Empirical Studies of Trade
F50 : International Economics→International Relations, National Security, and International Political Economy→General
F60 : International Economics→Economic Impacts of Globalization→General