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Global supply chain interdependence and shock amplification - evidence from Covid lockdowns

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  • Sally Chen
  • Eric Tsang
  • Leanne Si Ying Zhang

Abstract

Supply disruptions from the Covid-19 pandemic raised questions about the benefits and costs of global value chain (GVC) participation. We use granular data to document the evolution of GVC firm-level linkages in the aftermath of the Covid-19 outbreak and study how they might have affected equity investors' reaction to pandemic-related disruptions. We find that the number of GVC linkages generally declined and was slow to recover for some sectors after the Covid-19 shock but that the volume of the resilient linkages helped to cushion production disruptions. Firms with GVC links to countries undergoing Covid-related lockdowns suffered larger stock price losses than those without such links.

Suggested Citation

  • Sally Chen & Eric Tsang & Leanne Si Ying Zhang, 2023. "Global supply chain interdependence and shock amplification - evidence from Covid lockdowns," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:2303g
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    References listed on IDEAS

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    1. Mitsuyo Ando & Kazunobu Hayakawa, 2022. "Does the import diversity of inputs mitigate the negative impact of COVID-19 on global value chains?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(2), pages 299-320, February.
    2. Zhang, Si Ying, 2021. "Using equity market reactions and network analysis to infer global supply chain interdependencies in the context of COVID-19," Journal of Economics and Business, Elsevier, vol. 115(C).
    3. Jean-Noël Barrot & Julien Sauvagnat, 2016. "Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1543-1592.
    4. Yuzuka Kashiwagi & Yasuyuki Todo & Petr Matous, 2021. "Propagation of economic shocks through global supply chains—Evidence from Hurricane Sandy," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1186-1220, November.
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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