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Senior Economist,

European Central Bank

Contact

Vanessa.Gunnella@ecb.europa.eu

European Central Bank

DG Economics - Output and Demand Division

Sonnemannstraße 20

60314 - Frankfurt am Main


Research Interests

International Economics, Macroeconometrics, Time Series Econometrics, Econometric Methodology, Panel Data Econometrics


**The views expressed in my papers are mine and do not necessarily reflect those of the ECB**


Academic Publications


  • "Bought, sold and bought again: The impact of complex value chains on export elasticities", European Economic Review, 140, 103896, 2021 (with F. De Soyres, E. Frohm, E. Pavlova). Link

Abstract: Global value chain (GVC) participation affects the relationship between trade volumes and exchange rate movements. Guided by a simple theory, we show that exports react to the exchange rate between the country producing value added contained in exports and the country of final absorption for this value added. Three predictions follow: (i) a higher share of foreign value added in exports reduce the responsiveness of export volumes to exchange rate changes, (ii) a greater share of exports that returns as imports also reduce the responsiveness of export volumes and (iii) a higher share of inputs that are further re-exported increase the responsiveness of exports to the trading partner’s nominal effective exchange rate. Using a large origin–sector–destination level panel data set covering the period 1995–2009 and around 85% of world GDP, we find strong empirical support for these predictions.


  • "Spillovers in global production networks", Review of International Economics, 29(3), 663-680, 2021 (with E. Frohm). Link

Abstract: This paper studies the role of global input–output linkages in transmitting economic disturbances in the international economy. Our empirical results find that these links are both statistically significant and of economic importance for generating spillovers. We also provide evidence that it is not the inter-linkages per se that matter for the international transmission but rather the presence of global hub sectors that are either large suppliers or purchasers of other sectors' inputs. When the links between these sectors and the rest of the global value chain are severed, the spillovers diminish strongly and eventually become statistically insignificant. This highlights the importance of the structure of the production network for enabling spillovers and outlines the prominent role played by hub sectors in the global economy.



Research Papers


  • Input costs and inflation dynamics: The role of foreign and domestic cost shocks (with E. Frohm)

Abstract: Changes in input costs transmit through global supply chains and pass-through to domestic prices. To assess the relative importance of foreign and domestic input costs for firms price-setting, we employ a price-setting equation derived from equilibrium conditions of a model with limited exchange rate pass-through. We estimate the model with fixed effects regressions on a large panel containing 43 countries and 56 sectors over the years 20002014. Our results show that: (1), input costs are strongly transmitted via supply chains to prices for final consumption. (2), an aggregation exercise reveals that that the bulk of the input cost channel is dominated by input costs of domestic origins whereas foreign input costs accounts only for around a fifth of the total spillovers to inflation rates across countries, on average. (3) however, inflation rates in some countries are strongly affected by foreign input cost developments.


Abstract: Quantifying the effects of trade policy in the age of ’global value chains’ (GVCs) requires an enhanced analytical framework that takes the observed international input-output relations in due account. However, existing quantitative general equilibrium models generally assume that industrylevel bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This amounts to applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in available inputoutput data sets. To overcome this limitation of existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in inputoutput tables. This allows us to investigate the relation between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies.


  • The Expectation Hypothesis of the Term Structure of Very Short-Term Rates: Evidence from a New Testing Approach

Abstract: This paper empirically tests the Expectation Hypothesis of the term structure of the US repurchasing agreements (repo) rates, considered in a Vector Auto Regression (VAR) model. A multiple hypotheses approach is adopted, in order to jointly test all the statistical hypotheses implied by the EH, i.e. the long-run and short-run implications of the theory. Furthermore, the testing procedures are carried out by taking into account heteroskedasticity through bootstrap inference, White correction and rolling windows analysis. Differently from previous results, overall evidences in favor of the statistical non-rejection of the EH are found. In particular, the rolling window analysis clarifies that the EH has been rejected only during periods of turmoil of the financial/repo markets.


  • A SUR-bounds Panel Cointegration Test in the Presence of Cross-section Dependence

Abstract: This paper introduces a new panel cointegration test. It extends Pesaran, Shin and Smith (2001, JAE) bounds test by considering the individual regressions in a Seemingly Unrelated Regression (SUR) system. The algorithm to implement the test is developed and Monte Carlo simulation is used to analyze the properties of the test. The small sample properties of the test are remarkable, compared to its single equation counterpart. Size distortion is almost absent and power increases substantially. The use of the test is illustrated through a test of Purchasing Power Parity in a panel of EU15 countries.


  • Bootstrap Rank Determination in VAR Models - A Stata Command

Abstract: This paper introduces the Stata command bootrank which implements the bootstrap likelihood ratio rank test algorithm developed by Cavaliere, Rahbek and Taylor (2012, ECTA). The test improves the small sample properties of Johansen (1995) by generating I(1) bootstrap samples under the null cointegration rank. The procedure to test H(r) against H(p) is implemented, as well as the sequential procedure. The test is consistent and it shows good size properties.


  • The Euro Effects on EU Trade Flows and Balances: Evidence from the Cross Sectionally Correlated Panel Gravity Models (with C. Mastromarco, L. Serlenga and Y. Shin)

Abstract: Following recent developments in panel data studies, we propose the cross-sectionally dependent panel gravity models which deals with both strong and weak cross-section dependence, simultaneously. Our approach allows to control for trade barriers and multilateral resistance through the use of unobserved factors and an endogenously selected spatial cluster. Applying this methodology to the dataset for 91 country-pairs of EU14 countries over the period 1960-2008, we find that the Euro impact on trade is modest, but the Euro is found to promote EU integration by eliminating exchange rate-related uncertainties. The Euro is also found to contribute to significantly deteriorate the trade balance of the Southern against the Northern Euro members, though its magnitude seems to be rather modest as compared to massive current account imbalances observed in the Euro area. Hence, countries, pondering to join the Euro, would benefit from the ongoing process of integration, but should also be wary of unexpected build-up of unsustainable current account imbalances.



Policy Work

  • "Implications of the terms-of-trade deterioration for real income and the current account", Economic Bulletin Issue 3, April 2022 (with T. Schuler). Link

  • "Natural gas dependence and risks to activity in the euro area" ,Economic Bulletin Issue 1, February 2022 (with V. Jarvis, R.Morris and M. Tóth). Link Media coverage: Reuters, FT

  • "Global value chains - measurements, trends and drivers", ECB Occasional Paper Series, 2022 (with S. Cigna and L. Quaglietti). Link

  • "The impact of the euro on trade: 20 years into monetary union", ECB Occasional Paper Series, 2021 (with L. Lebastard, P.Lopez-Garcia, R. Serafini and A. Zona Mattioli). Link

  • "The impact of supply bottlenecks on trade", Economic Bulletin Issue 6, September 2021 (with E. Frohm, M. Mancini, T. Schuler). Link

  • "The implications of globalisation for the ECB monetary policy strategy", ECB Occasional Paper Series, 2021 (with ECB Work Stream on Globalisation). Link

  • "The semiconductor shortage and its implication for euro area trade, production and prices", Economic Bulletin Issue 4, June 2021 (with M.G. Attinasi, R. De Stefani, E. Frohm, G. Koester,M. Tóth, A. Melemenidis). Link

  • "Developments in the tourism sector during the COVID-19 pandemic", Economic Bulletin Issue 8, 2020 (with G. Krustev, T. Schuler). Link

  • "A review of economic analyses on the potential impact of Brexit", ECB Occasional Paper Series, 2020 (with IRC Brexit Task Force). Link

  • "Exchange rate pass-through in the euro area and EU countries", ECB Occasional Paper Series, 2020 (ed. E. Ortega and C. Osbat) (coordinator of Section 3 "Heterogeneity in ERPT across countries, sectors and time periods: structural characteristics"). Link

  • "Economic structures 20 years into the euro", ECB Occasional Paper Series, 2019. (with D. Sondermann, A. Consolo, G. Koester, K. Lambrias, P. Lopez-Garcia, C. Nerlich, F. Petroulakis, L. Saiz, R. Serafini. Link

  • "The impact of global value chains on the euro area economy", ECB Occasional Paper Series, 2019. (Secretary, with ECB Working Group on Global Value Chains). Link

  • "The economic implications of rising protectionism: a euro area and global perspective", Economic Bulletin Issue 3, 2019. (with L. Quaglietti). Link Media coverage: FT, New York Times, Bloomberg, Reuters, Handelsblatt, Les Echos