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Chinese supply chain shocks


  • Khalil, Makram
  • Weber, Marc-Daniel


In structural vector autoregressive models of US and euro area manufacturing, we use sign restrictions to identify shocks that alter the frictions to Chinese supply chain trade. We find a quantitatively significant role of such shocks for the decline of US manufacturing output at the height of the Sino-American trade tensions in 2019. At the beginning of the Covid-19 pandemic in early 2020, the results point towards large spillovers from the shutdown in China to manufacturing in the US and the euro area. Moreover, during the recovery in 2020 and 2021, positive Chinese supply chain shocks related to the shift of preferences towards goods with a large China valued-added content played a role. Interestingly, the impact of China-specific trade shocks is not limited to manufacturing sectors that are highly exposed to China. Furthermore, negative Chinese supply chain shocks cause upward price pressure across the whole manufacturing industry.

Suggested Citation

  • Khalil, Makram & Weber, Marc-Daniel, 2021. "Chinese supply chain shocks," MPRA Paper 110356, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:110356

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    References listed on IDEAS

    1. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
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    11. Baumeister, Christiane & Hamilton, James, 2018. "Inference in Structural Vector Autoregressions When the Identifying Assumptions are Not Fully Believed: Re-evaluating the Role," CEPR Discussion Papers 12911, C.E.P.R. Discussion Papers.
    12. Khalil, Makram & Strobel, Felix, 2021. "US trade policy and the US dollar," Discussion Papers 49/2021, Deutsche Bundesbank.
    13. Christoph E. Boehm & Aaron Flaaen & Nitya Pandalai-Nayar, 2019. "Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 60-75, March.
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    More about this item


    Cross-border supply-chain disruptions; China; trade tensions; Covid-19 recession; US and euro area manufacturing.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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