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Have Global Value Chains Contributed to Global Imbalances?

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  • Jane Haltmaier

Abstract

Global value chains (GVCs) have grown rapidly over the past several decades. Over the same period, the aggregate value of current account imbalances has risen substantially. This paper looks at whether these developments are related. While there is a sizable literature that has documented the rise of global production networks, there have been few attempts to assess the potential effect on global imbalances. The paper uses measures of GVCs developed in the literature in panel regressions to assess the effect on global imbalances over the period 1995-2011. It is argued that these variables should be entered as a product rather than individually and that they should be lagged, not contemporaneous with the change in current account balances. The results suggest that GVC position weighted by participation and trade share is negatively related to a country's current account balance, i.e., moving upstream in the production process is negative for a country's current account. However, the effects on global imbalances over the period studied appear to be small.

Suggested Citation

  • Jane Haltmaier, 2015. "Have Global Value Chains Contributed to Global Imbalances?," International Finance Discussion Papers 1154, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1154
    DOI: 10.17016/IFDP.2015.1154
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    References listed on IDEAS

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    Cited by:

    1. Devadas,Sharmila & Loayza,Norman V., 2018. "When is a Current Account Deficit Bad?," Research and Policy Briefs 130415, The World Bank.

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    More about this item

    Keywords

    Global value chains; current account balances;

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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