Fragmentation, the Crisis and Asia L Alan Winters Chief Economist, Department for International Development, Professor of Economics, University of Sussex And Xinyi Li, University of East Anglia
Page 2 Fragmentation Of production Vertical specialisation/integration A. Via trade data B. Via Input-Output data Has it worsened contagion/transmission? Of the world economy Trade policy
Page 3 Trade Shock Huge fall since September 2008 Determinants of speed and depth Exports Monthly 180 countries (Direction of Trade) Only upto March 2009
Page 4 Exports
Page 5 Filter into trend and residual Hodrick-Prescott – high-pass filter Set λ = 129,600
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Page 8 Three concepts of ‘hit’ ‘First Hit’: first month after January 2007 with a negative residual exceeding two standard deviations; if none, ‘not yet’ ‘Most Severe Hit’: The largest shortfall of exports relative to the smoothed trend ‘Largest Hit’: The largest month-on- month fall of exports
Page 9 First Hits
Page 10 Vertical Specialisation Hummels et al share of foreign intermediates in export value Pitigala – trade data approximation Intermediate imports/exports Here intermediate imports/total imports Averaged over , 165 countries
Page 11 First Hit Low VS – below median of sample (approx 43%) Early: 2008, late 2009 Jan-Mar; not yet – no residual < -2σ
Page 12 First Hits in Asia Low VS: Solomon Islands Tonga, Vanuatu, Samoa, Mongolia, Fiji, Afghanistan, Maldives; High VS: Papua New Guinea, Indonesia, Vietnam, Cambodia, Thailand, China, Malaysia, Philippines, Pakistan, India, Nepal, Sri Lanka, Bangladesh
Page 13 Average Depth of First Hit Residual of log(exports) from trend
Page 14 VS – an Input Output Measure 9 Asian countries and USA, 2000 Flows by industry and country ΔX = (I-A) -1 ΔY (I-A) -1 = I + A + A 2 + A 3 + ΔX 1 = ΔY ΔX 2 = ΔY + AΔY = (I + A) ΔY ΔX 3 = ΔY + AΔY + AAΔY = (I + A + A 2 ) ΔY
Page 15 Period 1 and 2 export losses, US shock
Page 16 Cumulative VS scores
Page 17 Export Losses vs. Cumulated VS
Page 18 Examples of Measures
Page 19 Measures Imposed
Page 20 Measures Suffered
Page 21 Thank you
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