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Collateral Imbalances in Intra-European Trade?

Author

Listed:
  • Arne J. Nagengast
  • Robert Stehrer

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Abstract One of the main stylised facts that has emerged from the recent literature on global value chains is that bilateral trade imbalances in gross terms can differ substantially from those measured in value added terms. However, the factors underlying the extent and sign of the differences between the two measures have so far not been investigated. Here, we propose a novel decomposition of bilateral gross trade balances that accounts for the differences between gross and value added concepts. The bilateral analysis contributes conceptually to the literature on double counting in trade by identifying the trade flow in which value added is actually recorded for the first time in international trade statistics. We apply our decomposition framework to the development of intra-EU-27 trade balances from 1995-2011 and show that a growing share of intra-EU bilateral trade balances is due to demand in countries other than the two direct trading partners.

Suggested Citation

  • Arne J. Nagengast & Robert Stehrer, 2014. "Collateral Imbalances in Intra-European Trade?," wiiw Working Papers 107, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:wpaper:107
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    References listed on IDEAS

    as
    1. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    2. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
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    4. Marcel P. Timmer & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2013. "Fragmentation, incomes and jobs: an analysis of European competitiveness," Economic Policy, CEPR;CES;MSH, vol. 28(76), pages 613-661, October.
    5. Mohsen Bahmani-Oskooee & Taggert Brooks, 1999. "Bilateral J-Curve between U.S. and her trading partners," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(1), pages 156-165, March.
    6. Erik Dietzenbacher & Bart Los & Robert Stehrer & Marcel Timmer & Gaaitzen de Vries, 2013. "The Construction Of World Input-Output Tables In The Wiod Project," Economic Systems Research, Taylor & Francis Journals, vol. 25(1), pages 71-98, March.
    7. Foster-McGregor, Neil & Stehrer, Robert, 2013. "Value added content of trade: A comprehensive approach," Economics Letters, Elsevier, vol. 120(2), pages 354-357.
    8. Puzzello, Laura, 2012. "A proportionality assumption and measurement biases in the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 105-111.
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    11. Bems, Rudolfs, 2014. "Intermediate inputs, external rebalancing and relative price adjustment," Journal of International Economics, Elsevier, vol. 94(2), pages 248-262.
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    15. di Mauro, Filippo & Pappadà, Francesco, 2014. "Euro area external imbalances and the burden of adjustment," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 336-356.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. João Amador & Sónia Cabral, 2017. "Networks of Value-added Trade," The World Economy, Wiley Blackwell, vol. 40(7), pages 1291-1313, July.
    2. Alessandro Borin & Michele Mancini, 2015. "Follow the value added: bilateral gross export accounting," Temi di discussione (Economic working papers) 1026, Bank of Italy, Economic Research and International Relations Area.
    3. Arne J. Nagengast & Robert Stehrer, 2016. "The Great Collapse in Value Added Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 392-421, May.
    4. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    5. Rita Cappariello & Alberto Felettigh, 2015. "How does foreign demand activate domestic value added? A comparison among the largest euro-area economies," Temi di discussione (Economic working papers) 1001, Bank of Italy, Economic Research and International Relations Area.
    6. Miroudot, Sébastien & ye, ming, 2018. "Tracing value-added and double counting in sales of foreign affiliates and domestic-owned companies," MPRA Paper 85723, University Library of Munich, Germany.
    7. Patricio Aroca & Randall Jackson, 2018. "Value Chains: Production Upstreamness and Downstreamness Revisited," Working Papers Working Paper 2018-01, Regional Research Institute, West Virginia University.
    8. repec:krk:eberjl:v:5:y:2017:i:2:p:51-69 is not listed on IDEAS
    9. Miroudot, Sébastien & Ye, Ming, 2017. "Decomposition of Value-Added in Gross Exports:Unresolved Issues and Possible Solutions," MPRA Paper 83273, University Library of Munich, Germany.
    10. Maria V. Sokolova, 2016. "Trade Re(Im)Balanced: The Role of Regional Trade Agreements," IHEID Working Papers 06-2016, Economics Section, The Graduate Institute of International Studies.
    11. Borin, Alessandro & Mancini, Michele, 2017. "Follow the Value Added: Tracking Bilateral Relations in Global Value Chains," MPRA Paper 82692, University Library of Munich, Germany.
    12. repec:wfo:wstudy:47500 is not listed on IDEAS
    13. Stefan Ederer & Peter Reschenhofer, 2014. "A global value chain analysis of macroeconomic imbalances in Europe," WWWforEurope Working Papers series 67, WWWforEurope.
    14. repec:bde:journl:y:2017:i:9:d:aa:n:20 is not listed on IDEAS
    15. Laura Dell'Agostino, 2017. "Italy’S Participation In International Supply And Production Networks Using Value Added Trade Data," Departmental Working Papers of Economics - University 'Roma Tre' 0228, Department of Economics - University Roma Tre.
    16. Buelens, Christian & Tirpák, Marcel, 2017. "Reading the Footprints: how foreign investors shape countries' participation in global value chains," Working Paper Series 2060, European Central Bank.

    More about this item

    Keywords

    trade balances; global value chains; vertical specialisation; value added; input-output tables;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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