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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
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.
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
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 ...
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".
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, ...