Do global value chains amplify global imbalances?

This paper addresses the impact of countries' participation in global value chains (GVCs) on their current account balances. Relying on a panel of 57 advanced and emerging countries, we do not find evidence that GVC participation directly raises economies' current account positions. On the contrary, we show that backward participation makes a negative contribution to current account balances: our results contradict the speculation that current account imbalances of downstream countries are likely to benefit more from GVC participation than economies which are located further upstream. Moreover, we show that there is no significant indirect effect of GVC on the current account operating through the exchange rate. Finally, our findings indicate that whereas GVC participation boosts exports, this increase is not accompanied by improvements in price competitiveness, nor by higher levels of saving rates.