Can information frictions boost trade?
Yes, argue Baley and al. because uncertainty facilitates cross-country risk sharing and, hence, more trade. They explain that when uncertainty is high, other countries do not realize that bad states of nature are prevailing domestically. Their exports provide the home country with lots of goods in exactly the states when consumption is most needed. In contrast, when uncertainty is low, this risk sharing mechanism is muted; informed countries substitute away from trade in states when they would prefer not to insure their trading partner. As a result, uncertainty-fueled increases in trade are due to the fact that risk sharing is most effective when both parties are uninformed.
Might Global Uncertainty Promote International Trade?
Authors: Isaac Baley, Laura Veldkamp, Michael E. Waugh
From: Universitat Pompeu Fabra, Columbia University, New York University
The evolution of global value chains
Gaulier and al. looked at trade data over the period 2000-2016, and in particular they focused on Part and Components (P&C) trade flows which capture GVC dynamics better than total intermediate goods, as shown in Figure 3. They find that:
- P&C trade related to office machinery and computers receded;
- P&C trade related to telecommunications equipment, the flagship IT revolution industry, thrived;
- Counts of clients or suppliers by stages of production indicate a higher and growing geographical diversity for P&C.
Are Global Value Chains Receding? The Jury Is Still Out.
Authors: Guillaume Gaulier, Aude Sztulman & Deniz Ünal
From: Banque de France, Université Paris-Dauphine, CEPII
Long lasting relationships in aggregate trade
Aquilante and al. used UN’s Comtrade database to look at the patterns of UK exports over the period 1962-2014. In particular, they analyzed data on 3,454,756 product-level relationships, comprised of up to 1,200 products exported by the UK to 150 countries. They found that:
[…] over 60% of 2014 exports were in product-country relationships that had been in place since the early sixties. This is despite the fact that these only account for 20% of total active relationships.
UK trade: going steady since the 1960s
By: Tommaso Aquilante, Enrico Longoni, Patrick Schneider – Bank of England