Working Paper: CEPR ID: DP13662
Authors: Jean Imbs; Laurent Pauwels
Abstract: Global trade can give rise to global hubs, centers of activity whose influence on the global economy is large enough that local disturbances have consequences in the aggregate. This paper investigates the nature, existence, and rise of such hubs using the World Input-Output Tables (WIOT) to evaluate the importance of vertical trade in creating global hubs that significantly affect countries volatility and their co-movement. Our results suggest that the world has become more granular since 1995, with significant consequences on GDP volatility and co-movements especially in developed countries. These consequences are well explained by international trade.
Keywords: aggregate volatility; GDP synchronization; global hubs; input-output linkages; world input-output tables; granularity
JEL Codes: E32; F44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| vertical trade (L14) | emergence of global hubs (F60) |
| emergence of global hubs (F60) | GDP volatility (E39) |
| emergence of global hubs (F60) | comovements among countries (F29) |
| global trade patterns (F10) | economic outcomes (F61) |
| large sectors in advanced economies (P19) | aggregate fluctuations (E10) |
| microeconomic shocks (E39) | aggregate effects (E10) |
| financial and real estate sectors (G29) | economic dynamics (P42) |