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Does too much finance suppress a country’s participation in the global value chains?

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  • Songlin Zeng
  • Zhenyi Wang
  • C. James Hueng
  • Sainan Huang

Abstract

Using a dynamic panel threshold model, we find a nonlinear effect of financial development on participation in the global value chains for 92 countries. The effect is positive below a threshold and turns negative above it. We provide evidence supporting our explanation that when a country’s financial system develops to a certain level, it serves foreign buyers by engaging more in outward foreign direct investments instead of enhancing its participation in the global value chains.

Suggested Citation

  • Songlin Zeng & Zhenyi Wang & C. James Hueng & Sainan Huang, 2022. "Does too much finance suppress a country’s participation in the global value chains?," Applied Economics Letters, Taylor & Francis Journals, vol. 29(16), pages 1504-1508, September.
  • Handle: RePEc:taf:apeclt:v:29:y:2022:i:16:p:1504-1508
    DOI: 10.1080/13504851.2021.1940081
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