IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/15558.html
   My bibliography  Save this paper

International Trade and Real Transmission Channels of Financial Shocks in Globalized Production Networks

Author

Listed:
  • Escaith, Hubert
  • Gonguet, Fabien

Abstract

The article analyses the role of international supply chains as transmission channels of a financial shock. Because individual firms are interdependent and rely on each other, either as supplier of intermediate goods or client for their own production, an exogenous financial shock affecting a single firm, such as the termination of a line of credit, reverberates through the productive chain. The transmission of the initial financial shock through real channels is tracked by modelling input-output interactions. The paper indicates that when banks operate at the limit of their institutional capacity, defined by the capital adequacy ratio, and if assets are priced to market, then a resonance effect amplifies the back and forth transmission between real and monetary circuits. The paper illustrates the proposed methodology by computing a supply-driven indicator (IRSIC) and indirect demand-driven impacts on five interconnected economies of different characteristics: China, Japan, Malaysia, Thailand and the United States.

Suggested Citation

  • Escaith, Hubert & Gonguet, Fabien, 2009. "International Trade and Real Transmission Channels of Financial Shocks in Globalized Production Networks," MPRA Paper 15558, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:15558
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/15558/1/MPRA_paper_15558.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/18432/1/MPRA_paper_18432.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christos T. Papadas & Dale C. Dahl, 1999. "Supply‐Driven Input‐Output Multipliers," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 269-285, May.
    2. repec:hal:wpspec:info:hdl:2441/2537 is not listed on IDEAS
    3. Rafael Repullo & Javier Suarez, 2008. "The Procyclical Effects of Basel II," Working Papers wp2008_0809, CEMFI.
    4. Guillaume Daudin & Paola Monperrus-Veroni & Christine Rifflart & Danielle Schweisguth, 2006. "Le commerce extérieur en valeur ajoutée," Revue de l'OFCE, Presses de Sciences-Po, vol. 98(3), pages 129-165.
    5. repec:hal:spmain:info:hdl:2441/2537 is not listed on IDEAS
    6. J. Peter Neary, 2009. "Putting the “New” into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    7. Mika Saito, 2004. "Armington elasticities in intermediate inputs trade: a problem in using multilateral trade data," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1097-1117, November.
    8. De MESNARD, Louis, 2007. "About the Ghosh model: clarifications," LEG - Document de travail - Economie 2007-06, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
    9. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    10. Inomata, Satoshi, 2008. "A New Measurement for International Fragmentation of the Production Process: An International Input-Output Approach," IDE Discussion Papers 175, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    11. Peltonen, Tuomas A. & Pula, Gabor, 2009. "Has emerging Asia decoupled? An analysis of production and trade linkages using the Asian international input-output table," Working Paper Series 993, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010. "International supply chains and trade elasticity in times of global crisis," WTO Staff Working Papers ERSD-2010-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. Escaith, Hubert, 2009. "Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession," MPRA Paper 18433, University Library of Munich, Germany.
    3. Georgescu, George, 2013. "România în perioada post-criză: investiţiile străine directe şi efecte asupra echilibrului financiar extern [Romania in post-crisis period: foreign direct investments and effects on external financ," MPRA Paper 46531, University Library of Munich, Germany.
    4. Porzecanski, Arturo C., 2009. "Latin America: The Missing Financial Crisis," MPRA Paper 18780, University Library of Munich, Germany.
    5. Bo Meng & Satoshi Inomata, 2011. "Impact of the Global Economic Crisis on Employment in the Asia-Pacific Region," Chapters, in: Satoshi Inomata (ed.), Asia Beyond the Global Economic Crisis, chapter 2, Edward Elgar Publishing.
    6. Hubert Escaith & Fabien Gonguet, 2011. "International Trade and Real Transmission Channels of Financial Shocks in Global Production Networks: An Asian–USA Perspective," Chapters, in: Satoshi Inomata (ed.), Asia Beyond the Global Economic Crisis, chapter 3, Edward Elgar Publishing.
    7. Ricardo Arguello C.a, 2009. "Latin America and the international economic CRISIS: THE TRADE CHANNEL," Economía, Gestión y Desarrollo 9340, Universidad Javeriana - Cali.
    8. Tulus T.H. Tambunan, 2012. "Trade response to economic shocks in Indonesia," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(8), pages 283-300.
    9. Jinjarak, Yothin, 2013. "Supply Chains and Credit-Market Shocks: Some Implications for Emerging Markets," ADBI Working Papers 443, Asian Development Bank Institute.
    10. Arguello C., Ricardo, 2009. "The International Economic Crisis, the Trade Channel, and the Colombian Economy," Perfil de Coyuntura Económica, Universidad de Antioquia, CIE, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hubert Escaith & Fabien Gonguet, 2011. "International Trade and Real Transmission Channels of Financial Shocks in Global Production Networks: An Asian–USA Perspective," Chapters, in: Satoshi Inomata (ed.), Asia Beyond the Global Economic Crisis, chapter 3, Edward Elgar Publishing.
    2. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2011. "Who produces for whom in the world economy?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1403-1437, November.
    3. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2008. "Value-Added Trade and Regionalization. GTAP Eleventh Annual Conference 'Future of Global Economy', Helsinki, Finland," Sciences Po publications info:hdl:2441/9541, Sciences Po.
    4. Gunnar Lindberg, 2011. "On the appropriate use of (input-output) coefficients to generate non-survey regional input-output tables: Implications for the determination of output multipliers," ERSA conference papers ersa10p800, European Regional Science Association.
    5. Escaith, Hubert, 2008. "Measuring trade in value added in the new industrial economy: statistical implications," MPRA Paper 14454, University Library of Munich, Germany.
    6. repec:hal:spmain:info:hdl:2441/9541 is not listed on IDEAS
    7. Boya Zhang & Shukuan Bai & Yadong Ning & Tao Ding & Yan Zhang, 2020. "Emission Embodied in International Trade and Its Responsibility from the Perspective of Global Value Chain: Progress, Trends, and Challenges," Sustainability, MDPI, vol. 12(8), pages 1-26, April.
    8. Ke Pang & Yao Tang, 2014. "Vertical Trade, Exchange Rate Pass-Through, and the Exchange Rate Regime," Open Economies Review, Springer, vol. 25(3), pages 477-520, July.
    9. Bo Meng & Ming Ye & Shang‐Jin Wei, 2020. "Measuring Smile Curves in Global Value Chains," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(5), pages 988-1016, October.
    10. Dirk WILLENBOCKEL & Sherman ROBINSON, "undated". "The Global Financial Crisis, LDC Exports and Welfare: Analysis with a World Trade Model," EcoMod2009 21500092, EcoMod.
    11. Lejour, Arjan & Rojas-Romagosa, Hugo & Veenendaal, Paul, 2012. "Identifying hubs and spokes in global supply chains with redirected trade in value added," Conference papers 332177, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Maritza Sotomayor, 2016. "Vertical Specialization of Production: Critical Review and Empirical Evidence for the Mexican Manufacturing Industries 1994-2014," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(2), pages 11-28, February.
    13. Escaith, Hubert, 2021. "Withering globalization? The Global Value Chain effects of trade decoupling," MPRA Paper 107935, University Library of Munich, Germany.
    14. Maritza Sotomayor, 2016. "Vertical Specialization of Production: Critical Review and Empirical Evidence for the Mexican Manufacturing Industries 1994-2014," International Journal of Business and Social Research, LAR Center Press, vol. 6(2), pages 11-28, February.
    15. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h4dj9499g is not listed on IDEAS
    16. Escaith, Hubert & Gaudin, Hadrien, 2014. "Clustering value-added trade: Structural and policy dimensions," WTO Staff Working Papers ERSD-2014-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Meng, Bo & Ye, Ming, 2022. "Smile curves in global value chains: Foreign- vs. domestic-owned firms; the U.S. vs. China," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 15-29.
    18. Lucia Tajoli & Giulia Felice, 2018. "Global Value Chains Participation and Knowledge Spillovers in Developed and Developing Countries: An Empirical Investigation," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 505-532, July.
    19. Gunnella, Vanessa & Al-Haschimi, Alexander & Benkovskis, Konstantins & Chiacchio, Francesco & de Soyres, François & Di Lupidio, Benedetta & Fidora, Michael & Franco-Bedoya, Sebastian & Frohm, Erik & G, 2019. "The impact of global value chains on the euro area economy," Occasional Paper Series 221, European Central Bank.
    20. ye, ming, 2016. "Trace the goods and value-added route in exports," MPRA Paper 73476, University Library of Munich, Germany.
    21. Escaith, Hubert & Lindenberg, Nannette & Miroudot, Sébastien, 2010. "International supply chains and trade elasticity in times of global crisis," WTO Staff Working Papers ERSD-2010-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    22. Hubert Escaith, 2014. "Mapping global value chains and measuring trade in tasks," Chapters, in: Benno Ferrarini & David Hummels (ed.), Asia and Global Production Networks, chapter 9, pages 287-337, Edward Elgar Publishing.

    More about this item

    Keywords

    international supply chains; monetary circuit; real linkages; transmission channels of financial shock; Asian International Input-Output Tables;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:15558. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.