Reports
Discussion Papers
No.563 A Unified Framework of Trade in Value Added; Physical, Monetary, Exchange Rates, and GHG Emissions
by Asao ANDO and Bo MENG
March 2016
ABSTRACT
Koopman
et
al.
(2014)
developed
a
method
to
consistently
decompose
gross
exports
in
value-added
terms
that
accommodate
infinite
repercussions
of
international
and
inter-sector
transactions.
This
provides
a
better
understanding
of
trade
in
value
added
in
global
value
chains
than
does
the
conventional
gross
exports
method,
which
is
affected
by
double-counting
problems.
However,
the
new
framework
is
based
on
monetary
input--output
(IO)
tables
and
cannot
distinguish
prices
from
quantities;
thus,
it
is
unable
to
consider
financial
adjustments
through
the
exchange
market.
In
this
paper,
we
propose
a
framework
based
on
a
physical
IO
system,
characterized
by
its
linear
programming
equivalent
that
can
clarify
the
various
complexities
relevant
to
the
existing
indicators
and
is
proved
to
be
consistent
with
Koopman's
results
when
the
physical
decompositions
are
evaluated
in
monetary
terms.
While
international
monetary
tables
are
typically
described
in
current
U.S.
dollars,
the
physical
framework
can
elucidate
the
impact
of
price
adjustments
through
the
exchange
market.
An
iterative
procedure
to
calculate
the
exchange
rates
is
proposed,
and
we
also
show
that
the
physical
framework
is
also
convenient
for
considering
indicators
associated
with
greenhouse
gas
(GHG)
emissions.
Keywords:
trade
in
value-added,
global
value
chain,
input-output
JEL
classification:
R15;
C65;
Q56
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.