Demand for Value Added and Value-Added Exchange Rates |
|
| Author:
| Bems, Rudolfs
Johnson, Robert C. |
| Series title: | IMF Working Papers |
| ISBN: | 978-1-5135-9504-7 |
| Publication Date: | Sep 2015 |
| Publisher: | International Monetary Fund
|
| Book Format: | Paperback |
| List Price: | USD $20.00 |
Book Description:
|
We examine the role of cross-border input linkages in governing how international relative price changes influence demand for domestic value added. We define a novel value-added real effective exchange rate (REER), which aggregates bilateral value-added price changes, and link this REER to demand for value added. Input linkages enable countries to gain competitiveness following depreciations by supply chain partners, and hence counterbalance beggar-thy-neighbor effects. Cross-country...
More DescriptionWe examine the role of cross-border input linkages in governing how international relative price changes influence demand for domestic value added. We define a novel value-added real effective exchange rate (REER), which aggregates bilateral value-added price changes, and link this REER to demand for value added. Input linkages enable countries to gain competitiveness following depreciations by supply chain partners, and hence counterbalance beggar-thy-neighbor effects. Cross-country differences in input linkages also imply that the elasticity of demand for value added is country specific. Using global input-output data, we demonstrate these conceptual insights are quantitatively important and compute historical value-added REERs.