Demand for Value Added and Value-Added Exchange Rates

Bems, Rudolfs; Johnson, Robert C.

doi:10.5089/9781513595047.001

Cited by 24 publications

(58 citation statements)

References 33 publications

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“…Notes : The GVC‐REER is our proposed measure of REER, which incorporates input–output linkages, as well as sectoral heterogeneity (in both REER weights and price indices). The VAREER corresponds to the value‐added REER measure proposed in Bems and Johnson (), which accounts for input–output linkages but not sectoral heterogeneity. IMF‐REER is a measure, which uses the IMF weighting scheme that ignores both input–output linkages and sectoral heterogeneity.…”

Section: Resultsmentioning

confidence: 99%

“…Sectors differ in the nature and extent of their interaction with each other and with sectors in the rest of the world, both in terms of sourcing inputs and selling their outputs. We build on the literature (in particular Bems and Johnson , henceforth BJ) that has already shown the importance of distinguishing intermediate and final goods trade in measuring REER, and find that allowing for sectoral heterogeneity provides an even bigger improvement in the quantification of REER as compared to incorporating imported inputs in a single sector framework.…”

Section: Related Literaturementioning

confidence: 99%

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Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Patel¹,

Wang²,

Wei³

2019

J of Money Credit Banking

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The real effective exchange rate (REER) is one of the most cited statistics in open‐economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within a country participate in international production sharing at different stages, sector‐level variations are also important for determining competitiveness. Incorporating these features, we develop a framework to compute REER at both the sector and country level and apply it on intercountry input‐output tables to study the properties of the new measures.

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Section: Resultsmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Patel¹,

Wang²,

Wei³

2019

J of Money Credit Banking

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“…One approach to reflect cross‐border linkages across countries in real exchange rate is to modify the standard REER formula. Bems and Johnson (, ) and Bayoumi, Saito, and Turunen () derive a new REER formula to incorporate the effect of GVCs. They assume that production structure takes the nested constant elasticity of substitution form which separates the production of domestic and foreign value added used in domestic production.…”

Section: Estimation Strategymentioning

confidence: 99%

“…The revised REER proposed by Bems and Johnson (, ) is as follows:

R E E R_{i} = \prod {()(, \frac{q_{i} R_{i}}{q_{k} R_{k}})}^{n_{ik}} with n_{ik} = \sum (\frac{p_{i}^{v} V_{italicik}}{p_{i}^{v} V_{i}}) (\frac{p_{j}^{v} V_{italicjk}}{P_{k} F_{k}}),

where i , j and k indicate each countries, q and R mean prices of production factors and nominal exchange rates, respectively. P and p represent price of final goods and composite factor.…”

Section: Estimation Strategymentioning

confidence: 99%

“…(), does not shed light on value‐added trade patterns directly. Thus we use the formula proposed by Bems and Johnson (, ) to incorporate the effect of GVCs into the REER formula in this study. Considering that sectoral heterogeneity causes significant bias in aggregate real exchange rate measures, we measure industry‐level REER for China, Japan and Korea.…”

Section: Estimation Strategymentioning

confidence: 99%

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Global value chain and its impact on the linkage between exchange rate and export: Cases of China, Japan and Korea

Bang

Park

2017

World Economy

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The link between exchange rate and trade has been studied for a long time, but there is no consensus about their relation. This paper tests the old argument, whether depreciation of real effective exchange rates (REERs) raises exports. We differentiate the test with earlier studies by employing a new measurement of REER and incorporating the effect of GVCs. We measured REER at industry level with value‐added trade weights. We analysed the topic with LSDV and system GMM for China, Japan and Korea since these counties are known to participate actively in GVCs. Our main finding is that exchange rate has significant impact on trade for three countries. However, the movement of elasticity of export to REER varies by country. While the elasticity in China decreased over time, Korea and Japan experienced increasing patterns between mid‐1990s and mid‐2000s and decreasing trends afterwards. This study also tests whether the level of incorporation in GVCs causes a change in elasticity. The results show that growing participation in GVCs lowers the elasticity of export to REER in absolute value. However, this result is only statistically significant in Korea.

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Explaining the employment effect of exports: Value-added content matters

Sasahara

2019

Journal of the Japanese and International Economies

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This paper estimates and decomposes the impact of export opportunities on countries' employment by using a global input-output analysis, focusing on the U.S., China, and Japan.The greater they export, the greater employment in the exporting countries. However, we first document that the number of jobs created per exports varies substantially across destination countries. We find that exports from sectors with higher domestic value-added contents such as natural resource, textile, and service sectors lead to a greater employment effect. As a result, cross-country differences in sectoral compositions of exports explain a large part of the variations in the employment effects across destination countries. Time series changes in the employment effect of exports come from changes in (1) the labor-tooutput ratio, (2) input-output linkages, and (3) sectoral compositions in exports. Results suggest that the first channel worked to reduce the employment effect in all of the three countries we focused but the directions of the last two channels are different across the countries.

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Demand for Value Added and Value-Added Exchange Rates

Cited by 24 publications

References 33 publications

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

Global value chain and its impact on the linkage between exchange rate and export: Cases of China, Japan and Korea

Explaining the employment effect of exports: Value-added content matters

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