The Inflexible Structure of Global Supply Chains

42 Pages Posted: 17 Oct 2019

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Jelle Barkema

International Monetary Fund (IMF)

Diego Cerdeiro

International Monetary Fund (IMF)

Date Written: September 2019

Abstract

The rise of global supply chains has had profound effects on individual economies and the global trading system, thereby complicating standard macroeconomic analyses. For many of the new and challenging questions brought about by this phenomenon, such as its impact on the global business cycle and measurements of competitiveness, the answer largely depends on one specific aspect of global value chains: how easily they can re-configure in response to changes in prices. We propose a parsimonious, generalized specification to test the degree of global-supply-chain flexibility. Our estimates show that, in the short run, the production structure is highly inflexible, and that this rigidity has, if anything, risen over time as supply chains have deepened over time. This finding is robust to alternative price measures, including those that account for the U.S. dollar's outsized role in trade through invoicing. While in the long run all estimated elasticities rise, supply chains remain somewhat inflexible. Our results have implications for analyses of cross-country business-cycle dynamics, the propagation of sectoral shocks, and the measurement of international competitiveness.

Keywords: Real effective exchange rates, Producer prices, Real exchange rates, Exchange rate policy, Commodity trade, Global supply chains, value-added trade, production and final-demand elasticities., WP, final demand, supply chain, value chain, FVA, long-run

JEL Classification: F15, F17, F63, E01, O24, F1, F13, D4

Suggested Citation

Bayoumi, Tamim and Barkema, Jelle and Cerdeiro, Diego, The Inflexible Structure of Global Supply Chains (September 2019). IMF Working Paper No. 19/193. Available at SSRN: https://ssrn.com/abstract=3471384

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jelle Barkema

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Diego Cerdeiro

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
100
PlumX Metrics