Search Results
Discussion Paper
Understanding Trade Fragmentation
A large empirical literature, including Gopinath et al. (2025), finds that geopolitical distance has become an increasingly important determinant of bilateral trade flows. This work has fueled debate about the consequences of fragmentation and the extent to which global value chains are being reshaped.
Discussion Paper
Increasing Business Cycles Synchronization: The Role of Global Value Chains, Market Power and Extensive Margin Adjustments
In this note, based on de Soyres and Gaillard (2019a, 2019b), we argue that the propagation of shocks across countries through trade linkages is large and propose the first model that accounts for such propagation with a magnitude in line with the data.
Discussion Paper
Real GDP and Productivity Measurement: What Do Macro Data Capture?
Since the publication of their 2021 "Blue Book", the UK's Office for National Statistics started to measure real GDP in the national accounts using double deflation. This methodological update follows the premise that "double deflation is internationally accepted as the best approach to producing volume estimates of industry Gross Value Added".
Discussion Paper
The Sectoral Evolution of China’s Trade
Since 2018, Chinese officials have been emphasizing the need for China to achieve greater self-reliance. As discussed in de Soyres and Moore (2024), China has reduced its reliance on imported inputs, while simultaneously becoming more dependent on foreign demand to absorb its manufactured goods. In this Note, we look at the evolution of the sectoral composition of China's exports and imports and investigate its similarity with the sectoral composition of the trade baskets of advanced economies (AEs). First, using a gravity model, we show that bilateral trade flows are significantly influenced ...
Working Paper
Value Added and Productivity Linkages Across Countries
What is the relationship between international trade and business cycle synchronization? Using data from 40 countries, we find that GDP comovement is significantly associated with trade in intermediate inputs but not with trade in final goods. Motivated by this new fact, we build a model of international trade that is able to replicate the empirical trade-comovement slope, offering the first quantitative solution for the Trade Comovement Puzzle. The model relies on (i) global value chains, (ii) price distortions due to monopolistic competition and (iii) fluctuations in the mass of firms ...
Working Paper
Global Trade and GDP Co-Movement
We revisit the association between trade and GDP comovement for 135 countries from 1970 to 2009. Guided by a simple theory, we introduce two notions of trade linkages: (i) the usual direct bilateral trade index and (ii) new indexes of common exposure to third countries capturing the role of similarity in trade networks. Both measures are economically and statistically associated with GDP correlation, suggesting an additional channel through which GDP fluctuations propagate through trade linkages. Moreover, high income countries become more synchronized when the content of their trade is ...
Working Paper
What is Measured in National Accounts?
Most statistical agencies construct sectoral real GDP using double deflation and base period prices. When the base period price used for intermediate inputs is not equal to their marginal revenue product, such as when firms apply a markup, real GDP fluctuations become mechanically linked to variations in intermediate inputs. This is because these inputs generate profits that are incorporated into real value added. Taking this channel into account, we demonstrate that real GDP reported in national accounts substantially diverges from a theory-consistent "physical" value added. This, in turn, ...
Working Paper
Consumption, Wealth, and Income Inequality: A Tale of Tails
We provide evidence that the distributions of consumption, labor income, wealth, and capital income exhibit asymptotic power-law behavior with a strict ranking of upper tail inequality, in that order, from the least to the most unequal. We show analytically and quantitatively that the canonical heterogeneous-agent model cannot replicate the proper ranking and magnitudes of these four tails simultaneously. Mechanisms addressing the wealth concentration puzzle in these models through return heterogeneity lead to a mirror consumption concentration puzzle. We match the cross-sectional data on ...
Working Paper
Recent Evolutions in the Global Trade System: From Integration to Strategic Realignment
This paper analyzes recent structural transformations in the global economic system, emphasizing the increasing geopolitical fragmentation and strategic realignments driven primarily by technological competition. We focus on China’s rise as a technological competitor. We introduce novel quantitative metrics such as the Export Similarity Index, the Partner Similarity Index, and the Ideal Point Distance to examine global shifts in trade patterns and sectoral competition. Our findings highlight competitive pressures in critical sectors, including machinery and advanced manufacturing, with ...
Working Paper
Partner Similarity and The Sectoral Evolution of China's Trade
We study how the sectoral composition of exports and imports shapes bilateral trade flows. Building on earlier similarity indices, we introduce the Partner Similarity Index (PSI), which measures sectoral alignment between a country’s export structure and its partner’s import demand. Embedded in a gravity framework, PSI is a strong predictor of bilateral trade flows after accounting for standard gravity determinants, trade policy variables, and high-dimensional fixed effects. Applied to China and advanced economies, the index reveals growing asymmetries: China’s export basket is ...