Discussion of Lewis&De Schryder and Kireyev&LeonidovJun 20, 2016 · • Proxies for main factors...
Transcript of Discussion of Lewis&De Schryder and Kireyev&LeonidovJun 20, 2016 · • Proxies for main factors...
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Discussion of Lewis&De Schryder and Kireyev&Leonidov by Julia Wörz Workshop TASK FORCE ON GLOBAL TRADE Paris, June 20, 2016 Foreign Research Division www.oenb.at
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John Lewis & Selien De Schryder (BoE): “Export dynamics since the Great Trade Collapse: a cross-country analysis”
Highly needed paper: mixes simple ingredients carefully to construct appropriate
proxies for explaining the great trade collapse
Findings
Elements
Possible extensions
Unclear points
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Lewis & De Schryder: Findings
• Great trade collapse (GTC) is a temporary phenomenon, does not indicate
structural shift to lower trade elasticity
• „Unexplained“ part of GTC (magnitude) can be explained by unobserved
common factors among countries, such as trade protectionism, credit
constraints, uncertainty
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Lewis & De Schryder: Elements
• Proxies for main factors determining export performance : foreign demand,
structural shifts in global demand, price competitiveness split into unit labor costs
and nominal effective exchange rate
• Panel ECM, PMG estimator with CCE (common external effects)
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Lewis & De Schryder: Possible extensions
• Estimation stops in 2011, thus insights about the GTC, but not about current trade weakness
• Coefficients estimated over period 1984-2008 without time variation, hence this average may not (yet) spot a structural change that occurred much prior to 2009
Chart 1.4 TFGT Report: Global imports and GDP growth
Source: IMF WEO. Notes: Imports of goods and services. Global GDP is aggregate at market exchange rates. The last observation refers to 2015.
Chart 1.3 TFGT Report: Ratio of global import growth to
global GDP growth
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Lewis & De Schryder: Possible extensions
• Extend to EMEs: these countries may experience more structural change
compared to AEs not trivial given tedious construction of proxies
• Shed light into unobserved common correlated effects this would be a second
paper
• GVC trade but this would be an entirely different paper
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Lewis & De Schryder: Unclear points
• Data sources not always indicated
• Trade-weighted world output / GDP growth (Y*) – is this the foreign demand
potential?
• Conditional forecasts: o Unwind previous shocks – is this the adjustment parameter?
o Relative performance – measured relative to what: country specific export potential (=forecast value) or sample average
o “Best performers” – best in terms of highest export growth? But not best in terms of meeting potential (i.e. minimal forecast error)
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Alexei Kireyev (IMF) and Andrei Leonidov (Lebedev Institute) : “Can Network Effects and Counter-Shock Policies Weaken International Trade”
Novel and detailed analysis of shock propagation highlighting network effects
Findings
Elements
Possible extensions
Unclear points
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Kireyev & Leonidov: Findings
• Direct and indirect effects of a shock differ depending on where the shock
originates and who are the trading partners
• More developed and more open countries propagate shocks more strongly, less
developed and especially commodity exporters often block shocks
• Regardless of the country of shock origin, some countries are always more
strongly affected (i.e. Hong Kong, Kyrgyz Republic)
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Kireyev & Leonidov: Elements
• Import demand functions: needed to assess the reaction of a country to a foreign
shock (pass-through coefficients), very detailed estimations (different
specifications, different lags, nominal and real term, for each country)
• Matrix of export-import-links / weights / spatial correlation
• Susceptibility to shocks is determined by exposure to origin country AND trade
elasticity
• Network algorithm
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Kireyev & Leonidov: Possible extensions
• Add overview: which origin countries are responsible for the largest
repercussions across global trading system in case of a shock
• Assess the extent of substitution / trade diversion that follows in reaction to a
shock in one specific country
• Account for the crucial role of final demand vs demand for intermediates /
position and participation in global production networks as before, this would
be an entirely different paper
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Kireyev & Leonidov: Unclear points
• Discussion of BoP-balances misleading, as focus is on trade only as shock
transmission channel
• Similar unclear if cointegration framework is necessary and used
• “export” vs “import” shock: does this refer to direct vs indirect effects?
Wouldn’t they necessarily have to be aggregated?
• How are the spillovers computed? There is no VAR, hence no IRFs
• What exactly is W (wij): share of j (=shock origin) in i’s exports (=potential
amplifier, absorber, blocker; = trade weight) * βi (=import elasticity to exports)
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Kireyev & Leonidov: Unclear points
• Definition of shock diffusion:
• βI > 1 … amplifying country ok
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