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Global Production Networks and Macroeconomic Interdependence

Objective

Researchers and policymakers alike have highlighted the potential efficiency gains of a global production structure. However, such linkages also raise the possibility of risks. This proposal tackles both empirical and theoretical challenges in incorporating the microeconomic structure of trade and international production networks in the study of the propagation of shocks internationally, and their impact on macroeconomic interdependence. Using newly constructed micro-level datasets, I provide quantitative analysis of the importance of the linkages in multicountry general equilibrium models of trade. First, using firm export and imported-input linkages, I provide a novel model-based estimation strategy to identify the role of country and firm-level shocks, and the implications of these estimates for the transmission of shocks across borders. By using structural trade models to estimate shocks at the firm level and studying the implications for the transmission of shocks across borders, I help bridge the micro-macro nexus in international economics. Second, I take an even more granular focus by studying the role of firm-to-firm production linkages in transmitting shocks across countries. To do so, I exploit a novel matching procedure between a country’s administrative dataset and cross-country firm-level data. I further build on these data by adding in domestic bank-firm relationships. This strategy allows for the study of how financial shocks are exported abroad via firms’ trade and multinational linkages. Third, I incorporate the insights from the empirical work into a full-scale multicountry general equilibrium model of trade, which allows for firm-level heterogeneity and microeconomic and macroeconomics shocks. I use the model for a quantitative study of the cross-country transmission of the different shocks via trade. This allows me to perform counterfactuals and examine the impact of policies, such as how opening to trade impacts macroeconomic interdependence.

Field of science

  • /natural sciences/chemical sciences/analytical chemistry/quantitative analysis
  • /social sciences/political science/public administration/bureaucracy
  • /natural sciences/computer and information sciences/databases
  • /social sciences/economics and business/economics/macroeconomics
  • /social sciences/economics and business/economics/microeconomics
  • /social sciences/economics and business/business and management/commerce

Call for proposal

ERC-2016-COG
See other projects for this call

Funding Scheme

ERC-COG - Consolidator Grant

Host institution

UNIVERSIDAD POMPEU FABRA
Address
Placa De La Merce, 10-12
08002 Barcelona
Spain
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 1 381 250

Beneficiaries (1)

UNIVERSIDAD POMPEU FABRA
Spain
EU contribution
€ 1 381 250
Address
Placa De La Merce, 10-12
08002 Barcelona
Activity type
Higher or Secondary Education Establishments