DP13662 Fundamental Moments

Author(s): Jean Imbs, Laurent Pauwels
Publication Date: April 2019
Keyword(s): aggregate volatility, GDP synchronization, global hubs, granularity, input-output linkages, World Input-Output Tables
JEL(s): E32, F44
Programme Areas: International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13662

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.