How Global Value Chains Change the Trade-Currency Relationship Accessible Data

Figure 1: Elasticity of export volumes to exchange rates for different quantiles of FV and RDV indices

Effect of FV and RDV on exchange rate elasticity per percentiles of all observations in 2009

Percentile Exchange rate elasticity of Exports
1% 0.19
5% 0.19
10% 0.19
25% 0.19
50% 0.18
75% 0.14
90% 0.04
95% -0.04
99% -0.21

Note: The horizontal axis corresponds to the different quantiles of GVC participation according to the weighted sum of FV and RDV indices, with weights corresponding to the marginal impact of the indices on export elasticities as measured in de Soyres et al (2018). The curve plots the corresponding elasticity of export volumes to exchange rates. For observations (which are "Origin-Sector-Destination") with the highest level of both FV and RDV (at the far right of the graph), the corresponding elasticity is negative, meaning that a devaluation would decrease exports.

Source: de Soyres et al. (2018).

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Figure 2: Average effect of FV and RDV on exchange rate elasticity across countries

This figure shows the impact of Global Value Chains for the elasticity of exports to currency depreciation. For each country plotted on the horizontal axis, the graph shows a red bar and a blue bar.

The red bar corresponds to the reduction of export elasticity due to the FV index (which stands for “Foreign Value Added” index), while the blue bar shows the reduction due to the RDV index (standing for “Return Domestic Value Added” index). The black line is simply the sum of these two bars and represents the total effect of both FV and RDV.

All figures are negative, which means that FV and RDV reduce the impact of currency depreciation on export volumes. For Large currency groups such as the Euro Area or the United States, an important part of the reduction of export elasticity comes from the RDV index (the blue bar). The situation is different for small open economies where most of the reduction stems from the impact of the FV index.

Note: The figure reports the total impact from FV and RDV on the exchange rate elasticity of exports of a given country across the origin-sector-destination dimension (on the vertical axis). Elasticities are computed from the specification in column (4) of Table 3 in de Soyres et al. (2018), including origin-sector-destination fixed effects and time dummies.

Source: de Soyres et al (2018), based on World Input-Output tables (2013 release) and BIS data.

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Last Update: February 03, 2020