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Global value chains over business cycles

Author

Listed:
  • Wang, Zhi
  • Wei, Shang-Jin
  • Yu, Xinding
  • Zhu, Kunfu

Abstract

Global Value Chains (GVCs) now represent a key aspect of economic interdependence across countries. This paper makes two methodological contributions. First, it proposes a framework with which to decompose total production activities at the country, sector, or country-sector level into different types depending on whether they are for pure domestic demand, traditional international trade, simple GVC activities, and complex GVC activities. Second, this work proposes a set of GVC participation indices that improves on measures used in the literature. Upon applying this framework to Inter-Country Input-Output Tables, we find a number of interesting patterns connecting value chains and business cycles. First, the composition of global production has evolved dramatically since 1995. Second, production activities of complex GVC activities comove with global business cycles more than other types of production activities. Third, the level of GVC participation affects the performance of economic growth.

Suggested Citation

  • Wang, Zhi & Wei, Shang-Jin & Yu, Xinding & Zhu, Kunfu, 2022. "Global value chains over business cycles," Journal of International Money and Finance, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:jimfin:v:126:y:2022:i:c:s0261560622000468
    DOI: 10.1016/j.jimonfin.2022.102643
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    References listed on IDEAS

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    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    2. Gangnes, Byron & Ma, Alyson C. & Van Assche, Ari, 2012. "Global Value Chains and the Transmission of Business Cycle Shocks," ADB Economics Working Paper Series 329, Asian Development Bank.
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    4. Carlo Altomonte & Filippo Di Mauro & Gianmarco I. P. Ottaviano & Armando Rungi & Vincent Vicard, 2012. "Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?," CEP Discussion Papers dp1131, Centre for Economic Performance, LSE.
    5. Richard Baldwin & Javier Lopez-Gonzalez, 2015. "Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses," The World Economy, Wiley Blackwell, vol. 38(11), pages 1682-1721, November.
    6. Zhi Wang & Shang-Jin Wei & Xinding Yu & Kunfu Zhu, 2017. "Characterizing Global Value Chains: Production Length and Upstreamness," NBER Working Papers 23261, National Bureau of Economic Research, Inc.
    7. Przemyslaw Kowalski & Javier Lopez Gonzalez & Alexandros Ragoussis & Cristian Ugarte, 2015. "Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies," OECD Trade Policy Papers 179, OECD Publishing.
    8. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    9. Bart Los & Marcel P. Timmer & Gaaitzen J. Vries, 2015. "How Global Are Global Value Chains? A New Approach To Measure International Fragmentation," Journal of Regional Science, Wiley Blackwell, vol. 55(1), pages 66-92, January.
    10. Baldwin, John R. & Yan, Beiling, 2014. "Global Value Chains and the Productivity of Canadian Manufacturing Firms," Economic Analysis (EA) Research Paper Series 2014090e, Statistics Canada, Analytical Studies Branch.
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    Cited by:

    1. Guo, Xuefan & Xu, Dingyi & Zhu, Kunfu, 2023. "Measuring digitalization effects in China: A global value chain perspective," China Economic Review, Elsevier, vol. 81(C).
    2. Wei, Shang-Jin & Yu, Xinding, 2022. "Characterizing Regionalism in Asia: A Modern Global Supply Chain Perspective," ADB Economics Working Paper Series 671, Asian Development Bank.
    3. D. Dessì & R. Paci, 2023. "The impact of Global Value Chains participation on countries' productivity," Working Paper CRENoS 202305, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Muwu Li & Yabin Zhang & Zhenguo Wang, 2023. "Will the Tax Reduction and Exemption Policy for High Technology Enterprises Improve the GVC Position of Chinese Firms?," Sustainability, MDPI, vol. 15(4), pages 1-20, February.
    5. Can Li & Qi He & Han Ji & Shengguo Yu & Jiao Wang, 2023. "Reexamining the Impact of Global Value Chain Participation on Regional Economic Growth: New Evidence Based on a Nonlinear Model and Spatial Spillover Effects with Panel Data from Chinese Cities," Sustainability, MDPI, vol. 15(18), pages 1-31, September.
    6. Ben Yahmed, Sarra & Berlingieri, Francesco & Brüll, Eduard, 2022. "Adjustments of local labour markets to the COVID-19 crisis: The role of digitalisation and working-from-home," ZEW Discussion Papers 22-031, ZEW - Leibniz Centre for European Economic Research.
    7. Ju, Jiandong & Lu, Bing & Yu, Xinding, 2023. "National Concentration of High-tech Products: The Second Great Divergence?," MPRA Paper 115956, University Library of Munich, Germany.
    8. Bing Lu & Jiandong Ju & Xinding Yu, 2023. "National Concentration of High‐tech Products: The Second Great Divergence?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(1), pages 88-118, January.

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    More about this item

    Keywords

    Global Value Chain (GVC); Participation Index; Economic Growth;
    All these keywords.

    JEL classification:

    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • F10 - International Economics - - Trade - - - General
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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