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Hang T. Banh, Mr. Philippe Wingender, and Cheikh A. Gueye
The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.
Hang T. Banh, Mr. Philippe Wingender, and Cheikh A. Gueye

Front Matter Page European Department Table of Contents Abstract I. Introduction II. Literature Review III. Data and Methodology A. Data B. Measures of Global Value Chains Measure of GVC Participation Measure of position in GVCs C. Productivity Estimation Method IV. Stylized facts A. Global Value Chain Participation of Estonia B. Productivity of Estonian firms C. GVC participation and Productivity V. Econometric results A. Impact of Global Value Chains participation on productivity at industry level B. Impact of

Hang T. Banh, Mr. Philippe Wingender, and Cheikh A. Gueye

borders more than once (Koopman et al. (2010)). Therefore, we apply the GVC participation measure proposed by Koopman et al. (2010) which captures all sources of value added in gross exports and eliminates the “double counting” problem. 3 The GVC participation index is defined as: G V C p c s = F V A C S + D V X C S G r o s s E x p o r t s c ( 3.2.1 ) where FVA cs denotes foreign value added of sector s

Ms. Faezeh Raei and Anna Ignatenko
Over the last two decades, world trade and production have become increasingly organized around global value chains (GVC). Recent theoretical work has shown that countries can benefit from participation in GVCs through multiple channels. However, little is known empirically about the economic importance of supply chains. We use the Eora MRIO database to compute different measures of GVC participation for 189 countries and illustrate global patterns of supply chains as well as their evolution over time in order to contribute to this topic. We find that GVC-related trade, rather than conventional trade, has a positive impact on income per capita and productivity, however there is large heterogeneity and the gains appear more signifcant for upper-middle and high-income countries. We document that “moving up” to more high-tech sectors while participating in major supply chains does take place but is not universal, suggesting other factors matter. We confirm the findings of the standard gravity literature for GVC trade; highlighting the key role of institutional features such as contract enforcement and the quality of infrastructure as determinants of GVC participation.
Mr. Arvind Subramanian and Mr. Devesh Roy
This paper examines different explanations-initial conditions, openness to trade and FDI, and institutions-of the Mauritian growth experience since the mid-1970s. We show that arguments based on openness to trade and FDI are either misleading or incomplete, and the transmission mechanism insufficiently identified. However, even when correctly articulated, openness appears to be a proximate rather than an underlying explanation for the Mauritian experience. The institution-based explanation offers greater promise. Ultimately, however, the econometric results indicate that existing explanations may be incomplete. Some idiosyncratic factors, particularly Mauritian diversity and the responses to managing it, may provide the missing pieces in the story of Mauritius's success.
Mr. Rudolfs Bems, Mr. Francesco Caselli, Mr. Francesco Grigoli, Bertrand Gruss, and Weicheng Lian
Following a period of disinflation during the 1990s and early 2000s, inflation in emerging markets has remained remarkably low and stable. Was this related to a global disinflation environment triggered by China's integration into world trade and the broader globalization in these economies, or to better domestic policies? In this paper, we review the inflation performance in a sample of 19 large emerging markets in the past couple of decades and quantify the impact of domestic and global factors in determining inflation. We document that the level, volatility, and persistence of inflation declined significantly, albeit not uniformly. Our results suggest that longer-term inflation expectations, linked to domestic factors, were the main determinant of inflation. External factors played a considerably smaller role. The results are a useful piece of evidence as emerging markets craft their monetary policies to navigate the future shift in global financial conditions.