TITLE:
International Fragmentation of Production and Trade Volatility: An Analysis for the European Countries
AUTHORS:
Anna Maria Falzoni, Lucia Tajoli
KEYWORDS:
Trade Fluctuations, International Outsourcing, Intermediate Goods
JOURNAL NAME:
Modern Economy,
Vol.6 No.3,
March
16,
2015
ABSTRACT: In the last years,
world exports have displayed very strong fluctuations, much higher than GDP
fluctuations. Some recent works tried to understand the causes of these
fluctuations, and in particular if these strong swings in world trade flows are
related to the growing weight of intermediates in trade and to the phenomenon
of international fragmentation of production (IFP) or international
outsourcing. This is the issue addressed in this paper. We analyze the
influence of international fragmentation of production and trade in
intermediate goods on the fluctuations of trade flows for the EU countries.
After assessing the relevance of international trade in intermediate goods at
the sector level using indices computed from the input-output tables of the EU
countries, we test whether a significant relation exists between the extent of
international fragmentation of production measured by this proxy and the
volatility of trade flows, and the possible implications of these results.