Value-Added Exchange Rates
This paper updates the conceptual foundations for measuring real effective exchange rates (REERs) to allow for vertical specialization in trade. We derive a value-added REER describing how demand for the value added that a country produces changes as the price of its value added changes relative to competitors. We then compute this index for 42 countries from 1970-2009 using trade measured in value added terms and GDP deflators. There are substantial differences between value-added and conventional REERs. For example, China's value-added REER appreciated by 20 percentage points more than the conventional REER from 2000-2009. These differences are driven mainly by the theory-motivated shift in prices used to construct the value-added REER, not changes in bilateral weights.
|Date of creation:||Oct 2012|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Robert C. Johnson & Guillermo Noguera, 2012. "Fragmentation and Trade in Value Added over Four Decades," NBER Working Papers 18186, National Bureau of Economic Research, Inc.
- Spilimbergo, Antonio & Vamvakidis, Athanasios, 2003.
"Real effective exchange rate and the constant elasticity of substitution assumption,"
Journal of International Economics,
Elsevier, vol. 60(2), pages 337-354, August.
- Antonio Spilimbergo & Athanasios Vamvakidis, 2000. "Real Effective Exchange Rate and the Constant Elasticity of Substitution Assumption," IMF Working Papers 00/128, International Monetary Fund.
- Robert C. Johnson, 2014. "Trade in Intermediate Inputs and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 39-83, October.
- Robert C. Johnson, 2012. "Trade in Intermediate Inputs and Business Cycle Comovement," NBER Working Papers 18240, National Bureau of Economic Research, Inc.
- Schmitz, Martin & De Clercq, Maarten & Fidora, Michael & Lauro, Bernadette & Pinheiro, Cristina, 2012. "Revisiting the effective exchange rates of the euro," Occasional Paper Series 134, European Central Bank.
- Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
- Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
- Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
- Vries, Gaaitzen J. de & Stehrer, Robert & Los, Bart & Erumban, Abdul Azeez & Timmer, Marcel, 2013. "Slicing Up Global Value Chains," GGDC Research Memorandum GD-135, Groningen Growth and Development Centre, University of Groningen.
- Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236. Full references (including those not matched with items on IDEAS)
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