Friend-shoring global value chains: a model-based assessment

Maria Grazia Attinasi, Lukas Boeckelmann and Baptiste Meunier

Economic Bulletin Boxes, 2023, vol. 2

Abstract: This box presents a stylised, model-based, general equilibrium assessment of the global economic effects of trade fragmentation. The focus is on a rather extreme scenario in which two hypothetical geopolitical blocs raise barriers to trade in intermediate goods, causing a relocation of supply chains to countries within the same bloc (“friend-shoring”). Using a model developed by Baqaee and Farhi, we find that economic losses (in terms of welfare, trade and prices) can be sizeable, depending on the degree of rigidities embedded in the model. Effects are also heterogeneous across countries, as small, open economies that are reliant on global value chains are more affected. The findings in this box suggest that trade fragmentation would be a lose-lose situation for all parties involved and leave the global economy more vulnerable to shocks. JEL Classification: F12, F13, O33

Keywords: fragmentation; international relations; International trade; rigidities (search for similar items in EconPapers)
Date: 2023-03
Note: 930374
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.ecb.europa.eu//press/economic-bulletin ... 3~d4063f8791.en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2023:0002:3

Access Statistics for this article

More articles in Economic Bulletin Boxes from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().