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Global Production Sharing, Trade Patterns and Determinants of Trade Flows

Author

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  • Prema-chandra Athukorala
  • Jayant Menon

Abstract

This paper examines the extent and pattern of global production sharing, focusing on East Asia, and probes its implications for the analysis of the determinants of trade flows. Reflecting rapid global spread of production sharing, trade in parts and components has increased at a much faster rate than total manufacturing trade in recent years and East Asia (both including and excluding Japan) is unique in the world for its heavy reliance on this new form of international exchange. The econometric analysis reveals that parts and components are highly insensitive to changes in relative prices and; as a result, the impact on aggregate trade flows of relative price changes diminishes as its share increases. This implies that exchange rate policy may be less effective in balance of payments adjustment, in countries where component trade is high and growing.

Suggested Citation

  • Prema-chandra Athukorala & Jayant Menon, 2010. "Global Production Sharing, Trade Patterns and Determinants of Trade Flows," Departmental Working Papers 2010-06, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2010-06
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2010/wp_econ_2010_06.pdf
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    Cited by:

    1. Park, Yung Chul & Song, Chi-Young, 2011. "Prospects for Monetary Cooperation in East Asia," ADBI Working Papers 314, Asian Development Bank Institute.
    2. Prema-chandra Athukorala, 2009. "The Rise of China and East Asian Export Performance: Is the Crowding-Out Fear Warranted?," The World Economy, Wiley Blackwell, vol. 32(2), pages 234-266, February.
    3. Kimura, Fukunari & Obashi, Ayako, 2011. "Production Networks in East Asia: What We Know So Far," ADBI Working Papers 320, Asian Development Bank Institute.
    4. MASWANA, Jean-Claude & FAROOKI, Masuma, 2013. "African Economic Growth Prospects: A Resource Curse Perspective," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 169-182.
    5. Prema-chandra Athukorala & Nobuaki Yamashita, 2009. "Global Production Sharing and Sino-US Trade Relations," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(3), pages 39-56.
    6. repec:era:wpaper:dp-2015-51 is not listed on IDEAS
    7. Jayant Menon, 2013. "Can FTAs Support the Growth or Spread of International Production Networks in Asia?," Departmental Working Papers 2013-06, The Australian National University, Arndt-Corden Department of Economics.
    8. Alessandrini, Michele & Fattouh, Bassam & Ferrarini, Benno & Scaramozzino, Pasquale, 2011. "Tariff liberalization and trade specialization: Lessons from India," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 499-513.
    9. Andrew Jia-Yi Kam, 2013. "International production networks and host country productivity: evidence from Malaysia," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(1), pages 127-146, May.

    More about this item

    Keywords

    Global production sharing; product fragmentation; determinants of trade flows; exchange rate policy;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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