1. 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

2. 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

3. 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

4. Page 4 Exports

5. Page 5 Filter into trend and residual Hodrick-Prescott – high-pass filter Set λ = 129,600

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8. 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

9. Page 9 First Hits

10. 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 1995-2008, 165 countries

11. Page 11 First Hit Low VS – below median of sample (approx 43%) Early: 2008, late 2009 Jan-Mar; not yet – no residual < -2σ

12. 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

13. Page 13 Average Depth of First Hit Residual of log(exports) from trend

14. 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

15. Page 15 Period 1 and 2 export losses, US shock

16. Page 16 Cumulative VS scores

17. Page 17 Export Losses vs. Cumulated VS

18. Page 18 Examples of Measures

19. Page 19 Measures Imposed

20. Page 20 Measures Suffered

21. Page 21 Thank you

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