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Chinese supply chain shocks

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  • Khalil, Makram
  • Weber, Marc-Daniel

Abstract

In structural vector autoregressive models of United States and euro area manufacturing, we use sign restrictions to identify shocks that alter the frictions to Chinese supply chain trade. We find a quantitatively significant role of such shocks for the decline of US manufacturing output at the height of the Sino-American trade tensions in 2019. At the beginning of the Covid-19 pandemic in early 2020, the results pointed towards large spillovers from the shutdown in China to manufacturing in the US and the euro area. Moreover, for the recovery in late 2020 and 2021, favourable Chinese supply chain shocks related to the shift of preferences towards goods with a large China valued-added content played a relevant role. Interestingly, the impact of Chinese supply chain shocks is not limited to manufacturing sectors that are highly exposed to China. Furthermore, negative Chinese supply chain shocks cause upward price pressure across the whole manufacturing industry.

Suggested Citation

  • Khalil, Makram & Weber, Marc-Daniel, 2022. "Chinese supply chain shocks," Discussion Papers 44/2022, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:442022
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    References listed on IDEAS

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    Cited by:

    1. Puch González, Luis Antonio & Ruiz, Jesús, 2024. "The asymmetry puzzle: the supply chain disruptions news shocks effects on oil prices and inflation," UC3M Working papers. Economics 43758, Universidad Carlos III de Madrid. Departamento de Economía.

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    More about this item

    Keywords

    Cross-border supply-chain disruptions; trade frictions; China; trade tensions; Covid-19 recession; US and euro area manufacturing;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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