Trade Linkages, Balance Sheets, and Spillovers: The Germany-Central European Supply Chain

October 14, 2013

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Format: Chicago

Selim A Elekdag, and Dirk V Muir. Trade Linkages, Balance Sheets, and Spillovers: The Germany-Central European Supply Chain, (USA: International Monetary Fund, 2013) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Germany and the Czech Republic, Hungary, Poland, and Slovakia (the CE4) have been in a process of deepening economic integration which has lead to the development of a dynamic supply chain within Europe—the Germany-Central European Supply Chain (GCESC). Model-based simulations suggest two key policy implications: First, as a reflection of strengthening trade linkages, German fiscal spillovers to the CE4 and more broadly to the rest of the euro area, have increased over time, but are still relatively small. This is explained by the supply chain nature of trade integration: final demand in Germany is not necessarily the main determinant of CE4 exports to Germany. Second, increased trade openness in both Germany and the CE4 implies a greater exposure of the GCESC to global shocks. However, owing to its strong fundamentals—including sound balance sheets and its safe haven status— Germany plays the role of a regional anchor of stability by better absorbing shocks from other trading partners instead of amplifying their transmission across the GCESC.

Subject: Exports, Financial sector policy and analysis, Financial statements, Fiscal policy, Fiscal stimulus, International trade, Public debt, Public financial management (PFM), Spillovers

Keywords: Aggregate demand, Aggregate demand demand shock, Asia and Pacific, Balance sheets, CE4, Czech Republic, Demand shock, DSGE models, Exports, Exports to Germany, Financial accelerator, Financial statements, Fiscal policy, Fiscal stimulus, Germany, Global, Hungary, Poland, Safe haven status, Slovakia, Spillovers, Supply chain, Trade, Trade channel, Trade linkage, Trade matrix, Trade openness, Vertical integration, Vertical specialization, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/210
Stock No:

WPIEA2013210
ISBN:

9781484355183
ISSN:

1018-5941

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