Title page
Contents
Acknowledgements 2
Executive summary 6
1. Introduction 8
2. Modelling of global transmission of production shocks in the OECD global trade model METRO 10
2.1. Growing geopolitical, policy and economic uncertainty? 10
2.2. Transmission of production shocks in the OECD global trade model METRO 12
2.3. The model set-up and design of simulations 15
3. Results: The effects of global production shocks 17
3.1. The global picture 17
3.2. Assessing exposure to GVC shocks from a national and industry perspective 21
4. Conclusions 33
References 36
Annex A. Methodological annex 38
Annex B. Tables and figures 49
Figure 2.1. Indices of policy uncertainty and geopolitical risk 11
Figure 2.2. Uncertainty as perceived by businesses and consumers 11
Figure 2.3. Variation of quarterly output growth rates across manufacturing sectors 12
Figure 2.4. Main channels of propagation of production shocks in GVCs 14
Figure 3.1. Comparison of sizes of shocks across the transmission channels 18
Figure 3.2. Typical exposure to GVC shocks across countries 22
Figure 3.3. Typical exposure to GVC shocks across global economic sectors 24
Figure 3.4. Maximum exposure to GVC shocks across countries 27
Figure 3.5. Maximum exposure to GVC shocks across global sectors 28
Figure 3.6. Decomposition of maximum exposures in electronics products in Germany, Japan and the United Sates, by country origin of shocks 30
Figure 3.7. Regions ranked by probability of threshold exceedance 32
Figure 3.8. Global perspective: The expected maximum impacts when random shocks occur together 33
Annex Tables
Table A A.1. Compare distribution of marginal output changes when there is a negative production shock 42
Table A B.1. Model database aggregation 49
Annex Figrues
Figure A A.1. METRO's production structure and transmission of 'foreign' and 'domestic' intermediate input production shocks 39
Figure A A.2. METRO Elasticities 40
Figure A A.3. Marginal output results do not change significantly with lower trade elasticities 42
Figure A A.4. Relative changes across regions and sectors remain the same (Part A) and Lower elasticities "keeps" the impact domestically (Part B) 43
Figure A A.5. Maximum negative exposure rankings, sensitivity analysis 44
Figure A A.6. Impacts of negative output shocks on three national electronics sectors 47
Figure A A.7. Industry origin of value added in the electronics sector 48
Figure A B.1. Distribution of effects of global production shocks (mobile factors assumption) 50
Figure A B.2. Distribution of effects of global production shocks (immobile factors assumption) 51
Figure A B.3. Regression results for foreign vertical shocks 52
Figure A B.4. Typical exposure to GVC shocks by affected country-sector 53
Figure A B.5. Maximum exposure to GVC shocks by affected country-sector 54
Figure A B.6. Decomposition of maximum exposures in iron and steel products in Germany, Japan and the United Sates, by country origin of shocks 55
Figure A B.7. Decomposition of maximum exposures in motor vehicles products in Germany, Japan and the United Sates, by country origin of shocks 56
Figure A B.8. Typical exposure to GVC shocks across countries (intra-EU shocks excluded) 57
Figure A B.9. Maximum exposure to GVC shocks across countries (intra-EU shocks excluded) 58