CAIRN-INT.INFO : International Edition

The breakdown of international value chains is an important aspect of globalization. Many studies have investigated the spread of a global demand shock to the embedded goods’ countries of origin. This article examines the effect of supply shocks on prices, with assumed cost-push inflation, using global Input-Output tables from the OECD. The first part presents our methodology, in particular our adaptation of the Leontief price model to a world economy to analyze exchange rate and productivity shocks. The second part empirically analyzes the impact of shocks on the euro area and the rest of the world when the shock comes from the euro area. The third part discusses the diffusion modalities of the shocks and shows that they are dominated by first-round effects and hence the share of production or exports that is made using imported inputs. Our model shows that exchange rate shocks are partially offset by changes in input prices, which, in the case of exchange rate appreciation, limit the loss of competitiveness. In euro area countries. the magnitude of this compensation is not insignificant, and it is even higher due to the countries’ openness. It is also more important for export prices than for production prices. It is higher for Germany than for France. The effects of productivity shocks are much greater, in particular because there is a domestic amplification effect before they spread internationally. Among large countries, Germany is the most likely to benefit from productivity gains in the CEECs outside the Euro zone. JEL codes: C67 E31 F42.


  • value-added trade
  • euro area
  • Leontief model
  • cost-push inflation
Marion Cochard
Guillaume Daudin
Sandra Fronteau
Christine Rifflart
This is the latest publication of the author on cairn.
This is the latest publication of the author on cairn.
This is the latest publication of the author on cairn.
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