How Does Foreign Demand Activate Domestic Value Added? A Comparison Among the Largest Euro-Area Economies
43 Pages Posted: 24 Apr 2015
Date Written: January 23, 2015
We propose an analysis for the largest euro-area countries (France, Germany, Italy and Spain), based on the framework developed by Koopman et al. (2014) for tracing value added in a country’s exports by source and use. We integrate their approach by introducing an additional dimension: the domestic-sector origin of value added embodied in exports. While providing an accurate picture of these countries’ participation in global value chains, we estimate the impact on their GDP of a shock to foreign demand and disentangle individual contributions along a geographical dimension in a period running from the introduction of the euro to the beginning of the sovereign debt crisis.
Keywords: global value chains, final internal demand, domestic value added activation, trade in value added
JEL Classification: F14, F15
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