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International Production Networks Are Overcoming COVID-19 Shocks: Evidence from Japan's Machinery Trade

Author

Listed:
  • Mitsuyo Ando

    (Faculty of Business and Commerce Keio University Japan)

  • Fukunari Kimura

    (Faculty of Economics Keio University Japan Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia)

  • Ayako Obashi

    (School of International Politics Economics and Communication Aoyama Gakuin University Japan)

Abstract

This paper investigates the impacts of COVID-19 on international production networks in machinery sectors by shedding light on negative supply shocks, negative demand shocks, and positive demand shocks. Specifically, we examined changes in trade in the trade-fall periods amid COVID-19 in 2020 using Japan's machinery trade at the most disaggregated level and decomposed them into two intensive margins (i.e., the quantity effect and the price effect) and two extensive margins (i.e., the entry effect and the exit effect). Our empirical results show that trade relationships for parts and components were robust even amid COVID-19 and that international production networks in machinery sectors were almost intact. They also demonstrate that COVID-19 brought positive demand shocks for specific products with special demand due to its nature in addition to negative supply shocks and negative demand shocks, which partially explains heterogeneous effects not only among sectors but also among products in the same sector. As of October 2020, Japan's machinery trade seems to have mostly recovered.

Suggested Citation

  • Mitsuyo Ando & Fukunari Kimura & Ayako Obashi, 2021. "International Production Networks Are Overcoming COVID-19 Shocks: Evidence from Japan's Machinery Trade," Asian Economic Papers, MIT Press, vol. 20(3), pages 40-72, Fall.
    • Handle: RePEc:tpr:asiaec:v:20:y:2021:i:3:p:40-72
    DOI: 10.1162/asep_a_00835
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    Cited by:

    1. Ando, Mitsuyo & Hayakawa, Kazunobu, 2022. "Impact of COVID-19 on trade in services," Japan and the World Economy, Elsevier, vol. 62(C).
    2. Mitsuyo Ando & Kazunobu Hayakawa & Fukunari Kimura, 2024. "Supply Chain Decoupling: Geopolitical Debates and Economic Dynamism in East Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 62-79, January.
    3. LIANG, Licheng, 2023. "Resilience of Japanese Multinational Enterprises' Production Networks during the COVID-19 Pandemic," Discussion Paper Series 742, Institute of Economic Research, Hitotsubashi University.
    4. Fukunari Kimura & Keita Oikawa, 2022. "The Conceptual Framework of New Development Strategies," Chapters, in: Fukunari Kimura & Keita Oikawa (ed.), The Comprehensive Asia Development Plan (CADP) 3.0: Towards an Integrated, Innovative, Inclusive, and Sustainable Economy, chapter 1, pages 2-56, Economic Research Institute for ASEAN and East Asia (ERIA).

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