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Fragmentation, the Crisis and Asia

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. Fragmentation. Of production Vertical specialisation/integration Via trade data

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Fragmentation, the Crisis and Asia

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  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. Fragmentation • Of production • Vertical specialisation/integration • Via trade data • Via Input-Output data • Has it worsened contagion/transmission? • Of the world economy • Trade policy

  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. Exports

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

  6. 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

  7. First Hits

  8. 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

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

  10. 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

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

  12. 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 + A2 + A3 + ΔX1 = ΔY ΔX2 = ΔY + AΔY = (I + A) ΔY ΔX3 = ΔY + AΔY + AAΔY = (I + A + A2) ΔY

  13. Period 1 and 2 export losses, US shock

  14. Cumulative VS scores

  15. Export Losses vs. Cumulated VS

  16. Examples of Measures

  17. Measures Imposed

  18. Measures Suffered

  19. Thank you

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