Global and Regional Shock Transmission ― New Evidence from Globally Integrated Input-Output Table

25  September 2012    4:00 pm

Kiyotaka Sato (with Nagendra Shrestha), Yokohama National University


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)


By employing the globally integrated input-output table (henceforth, GIO table), this paper empirically investigates the degree of shock transmission across countries to show the new evidence of the regional and global economic linkages with a focus on East Asian countries. We construct the new GIO table for six years from 2005 through 2010 with 35 industries, 27 endogenous countries and 61 exogenous countries. We conduct the simulation analysis by generating a fall of the US import demand for final goods to explore how and to what extent a negative shock to the US import demand is transmitted globally and regionally to the production and trade of intermediate goods. The simulation results show that Japan tends to be severely affected by a fall of the US import demand for final products, not only because the Japan’s final goods sectors procure most of intermediate inputs from the domestic sectors, but also because Japan’s intermediate goods production is largely integrated into the regional production chain in East Asia. Given the Japan’s unique production structure with the asymmetric shock transmission pattern, it is difficult to expect synchronized business cycles between Japan and the East Asian countries.

Keywords: Global Input-Output table, shock transmission, East Asia, production-chain, intermediate goods trade, business cycle synchronization

JEL classification: F15, F33, F42, F44