Inputs in distress: geoeconomic fragmentation and firms' sourcing

Ludovic Panon, Laura Lebastard (laura.lebastard@ecb.europa.eu), Michele Mancini, Alessandro Borin (alessandro.borin@bancaditalia.it), Peonare Caka (peonare.caka@bsi.si), Gianmarco Cariola (gianmarco.cariola@bancaditalia.it), Dennis Essers, Elena Gentili (elena.gentili@bancaditalia.it), Andrea Linarello, Tullia Padellini (tullia.padellini@bancaditalia.it), Francisco Requena Silvente and Jacopo Timini
Additional contact information
Laura Lebastard: European Central Bank
Alessandro Borin: Bank of Italy
Peonare Caka: Bank of Slovenia
Gianmarco Cariola: Bank of Italy
Elena Gentili: Bank of Italy
Tullia Padellini: Bank of Italy

No 861, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study how disruptions to the supply of foreign critical inputs (FCIs) – inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products, or inputs which are key to the green transition – may affect value added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how geoeconomic fragmentation may affect EU economies differently. Our baseline calibration suggests that a 50 per cent reduction in imports of FCIs from China and other countries with a similar geopolitical orientation would result in sizeable value added losses with significant heterogeneity across firms, sectors, regions, and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs.

Keywords: geoeconomic fragmentation; global value chains; global sourcing; international trade; imported inputs (search for similar items in EconPapers)
JEL-codes: F10 F14 F50 F60 (search for similar items in EconPapers)
Date: 2024-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Inputs in Distress: Geoeconomic Fragmentation and Firms’ Sourcing (2024)
Working Paper: Inputs in distress: geoeconomic fragmentation and firms’ sourcing (2024)
Working Paper: Inputs in distress: Geoeconomic fragmentation and firms' sourcing (2024)
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