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

Abstract

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

Suggested Citation

Cappariello, Rita and Felettigh, Alberto, How Does Foreign Demand Activate Domestic Value Added? A Comparison Among the Largest Euro-Area Economies (January 23, 2015). Bank of Italy Temi di Discussione (Working Paper) No. 1001, Available at SSRN: https://ssrn.com/abstract=2598066 or http://dx.doi.org/10.2139/ssrn.2598066

Rita Cappariello (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alberto Felettigh

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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