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Demand for Value Added and Value-Added Exchange Rates

Rudolfs Bems and Robert Johnson ()

No 15/199, IMF Working Papers from International Monetary Fund

Abstract: We examine the role of cross-border input linkages in governing how international relative price changes influence demand for domestic value added. We define a novel value-added real effective exchange rate (REER), which aggregates bilateral value-added price changes, and link this REER to demand for value added. Input linkages enable countries to gain competitiveness following depreciations by supply chain partners, and hence counterbalance beggar-thy-neighbor effects. Cross-country differences in input linkages also imply that the elasticity of demand for value added is country specific. Using global input-output data, we demonstrate these conceptual insights are quantitatively important and compute historical value-added REERs.

Keywords: Goods; Price elasticity; Production; Real effective exchange rates; Export competitiveness; Demand; Real effective exchange rate, global supply chains, value, value added, elasticity, General, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-opm
Date: 2015-09-08
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Related works:
Journal Article: Demand for Value Added and Value-Added Exchange Rates (2017) Downloads
Working Paper: Demand for Value Added and Value-Added Exchange Rates (2015) Downloads
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