CONNECTIVITY COUNTS: HOW IS
THE GEOGRAPHY OF
INTERNATIONAL TRADE LINKAGES
CHANGING AND WHAT IS THE
EFFECT ON INTERNATIONAL
SHOCK TRANSMISSION?
Eleonora Mavroeidi
OECD, Economics Department
Macroeconomic Analysis Division
• Evolution of interconnectivity and centrality of international trade before and after the global financial crisis
• Variation in the contagion of pre- and post-crisis trade shocks.
2
Objectives
• Inter-Country Input-Output (ICIO), OECD TiVA (2018)
– 64 countries
– 36 industries
– 2005 - 2015
Network:
• Nodes: country – industry pairs
• Weights: input transaction flows from a country/industry to a partner country/industry
• Edges are directed: A B: B uses inputs from A
3
Data
4
Network Characteristics
- Centrality measures
Forward PageRank
Backward PageRank
- Community detection
Louvain algorithm
China has emerged as the most important hub of global trade
5
Note: Page-Rank Measure. Centrality reflects the relative importance of a country in the world input-output network, taking into account
the size of its trade activity (total exports), the number of trading partners and the importance of these partners in the overall network
Source: OECD Secretariat
0
0.2
0.4
0.6
0.8
1
1.2
0
0.2
0.4
0.6
0.8
1
1.2CHN
USA
DEU
FRA
ITA
JPN
GBR
IND
ESP
KOR
RUS
BRA
TUR
AUS
CAN
MEX
CHE
NLD IDN
BEL
COL
POL
LUX
MYS
VNM
SWE
DNK
ARG
AUT
THA
CZE
CHL
NZL FIN
NOR
PRT
ISR
LVA
SVK
IRL
GRC
HUN
EST
SVN
LTU ISL
2015 2005
Relative Centrality by country, 2005 and 2015
2005 2015
USA Motor vehicles, trailers and semi-trailers CHN Computer, electronic and optical products
CHN Computer, electronic and optical products USA Motor vehicles, trailers and semi-trailers
USA Construction DEU Motor vehicles, trailers and semi-trailers
DEU Motor vehicles, trailers and semi-trailers USA Public admin. and defense; compulsory social security
USA Public admin. and defense; compulsory social security MEX Motor vehicles, trailers and semi-trailers
CAN Motor vehicles, trailers and semi-trailers USA Construction
USA Wholesale and retail trade; repair of motor vehicles USA Other business sector services
USA Other business sector services CHN Construction
MEX Motor vehicles, trailers and semi-trailers USA Wholesale and retail trade; repair of motor vehicles
USA Human health and social work USA Human health and social work
USA Food products, beverages and tobacco CHN Electrical equipment
USA Computer, electronic and optical products CHN Basic metals
USA Transportation and storage CHN Chemicals and pharmaceutical products
DEU Food products, beverages and tobacco USA Food products, beverages and tobacco
USA Machinery and equipment, nec GBRArts, entertainment, recreation and other service
activities
USA Chemicals and pharmaceutical products CAN Motor vehicles, trailers and semi-trailers
KOR Computer, electronic and optical products CHN Machinery and equipment, nec
DEU Machinery and equipment, nec DEU Food products, beverages and tobacco
GBRArts, entertainment, recreation and other service
activitiesCHN Motor vehicles, trailers and semi-trailers
MYS Computer, electronic and optical products KOR Computer, electronic and optical products 6
Top 20 most central industries in 2005 and 2015
7
Less but more dense production hubs
have emerged
0
50
100
150
200
250
300
350
400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
No
of
No
des
(co
un
try
-in
du
stry
pa
irs)
Communities
2005 2015
8
Diffusion Mechanism
Watts threshold model
- Seed: country-industry pairs adopt a given behavior –trade
restrictions
- Threshold: fraction of the number of neighbors that need to adopt
the behavior before imitating
- W =[ 𝑤𝑖𝑗] − 𝑖𝑛𝑝𝑢𝑡 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑙𝑖𝑛𝑘𝑎𝑔𝑒𝑠
𝜑𝑖 = ∆ 𝐺 for all i
𝑘𝑖𝑖𝑛 =
𝑗
𝑤𝑖𝑗
𝑘𝑖𝑖𝑛/𝑖𝑛𝑓𝑒𝑐𝑡𝑒𝑑
=
𝑗∈𝐼
𝑤𝑖𝑗 𝑤ℎ𝑒𝑟𝑒 𝐼 = 𝑠𝑒𝑡 𝑜𝑓 𝑖𝑛𝑓𝑒𝑐𝑡𝑒𝑑′ 𝑛𝑜𝑑𝑒𝑠
- Node infected if 𝑘𝑖𝑖𝑛/𝑖𝑛𝑓𝑒𝑐𝑡𝑒𝑑
/𝑘𝑖𝑖𝑛>𝜑𝑖
9
Shock transmission over time
Source: OECD calculations.
Transmission comparison 2005-201510% of nodes adopt trade restrictions
10
Shock transmission over different
thresholds
Source: OECD calculations.
Network structure:
- Relative important sectors
- Clusters formation
Shock transmission
- Trade restriction shocks transmit faster and the cost of
negative shocks will be higher post-crisis than pre-crisis
11
Summary
THANK YOU
12
14
Increased density pre and post crisis
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
Sh
are
of
no
des
Sector
2005 2015
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