Research On The Impact Of Global Value Chain On International Business Cycle Comovement

With the deepening of economic globalization,countries in the world have become more and more closely connected economically.In recent years,with the costs of transportation and communication falling,“fragmentation” production pattern spread across the world,more and more goods producted and saled not by a single country,but by many countries,every country participates a percentage of the production,through using intermediate products from abroad to complete the final products and export,thus promoting the formation and development of global value chain(GVC).With the deepening of GVC,the impact of value chain trade on the international business cycle comovement is increasingly prominent.As the trend of anti-globalization and trade protectionism continues to rise,especially in the context of COVID-19 sweeping the world and the sluggish world economy,the external environment for China's participation in the division of GVC has undergone profound changes,and how to deal with the challenges has become an important issue.The substitution of traditional bilateral trade weakens the business cycle comovement between the two countries.In the context of GVC,the vertical or complementary relationship formed by trade in intermediate products enhances the business cycle comovement between the two countries.Although Duval et al.(2016)proposed using value-added trade as the trade accounting standard,excluding the value-added of the third country implied in the final product,namely the traditional“third country effect”.However,the traditional “the third countries” failed to consider the global value chain supply shocks on the mutual impact on the downstream countries and bring international business cycle comovement(i.e.,GVC backward participation “third countries effect”),the downstream demand shock on the common effects on the upstream countries and bring international business cycle comovement(GVC forward participation “third countries effect”),the existence of similar value-added trading partners and bring international business cycle comovement(the value-added trade “third country effect”).Therefore,on the basis of previous studies,this paper studies the impact of GVC on the international business cycle comovement from the perspectives of value-added trade,GVC participation,GVC forward participation “third countries effect”,GVC backward participation “third countries effect” and value-added trade “third countries effect”.It is expected to provide reference basis for polocy-makers to formulate effective international and domestic economic development policies scientifically and realize the steady economic development,which has important theoretical and practical significance meaning.Following the “theoretical analysis-fact description-empirical test-countermeasures" analytical paradigm,comprehensive carding the theory of international division,the value-added trade,GVC and international business cycle comovement,this article analyzes the conduction mechanism of the impact of GVC on international business cycle comovement.And from the perspective of the global and China's respectively,this article empirically testes the impact of GVC on the international business cycle comovement,and then obtains the quantitative relationship between them.The main conclusions of this paper are as follows:Firstly,theoretical model analysis finds that under the situation of supplydemand shock,GVC will have a positive impact on the international business cycle comovement.In the case of supply shock,GVC participation and GVC backward participation “third countries effect” have a positive impact on the international business cycle comovement.In the case of demand shock,GVC participation and GVC forward participation “third countries effect” have a positive impact on the international business cycle comovement.When there is industry heterogeneity in supply shock or demand shock,industrial structure similarity also has a positive impact on international business cycle comovement.Second,from a global perspective,both GVC forward participation and GVC backward participation experienced a rapid rise before the year of 2008,and then began to fall.From a national perspective,there are certain differences in the degree and the way of GVC participation between different countries.From an industry perspective,agriculture,mining,and service industries are mainly integrated into the GVC through forward participation,while the manufacturing industry is integrated into the GVC through backward participation.From a bilateral perspective,China,Germany,and the United States are the three global value chain hubs,and the added value of these countries is often used by other countries to produce export products.From the perspective of the development trend of the international business cycle comovement,the business cycle comovement of various countries has gradually increased after the year of 1990,especially during the period of 2008 financial crisis,the economic growth rate of each country has simultaneously experienced a sharp decline.There is a significant positive correlation between the embedding of GVC and the international business cycle comovement.With the in-depth development of GVC,the economies of various countries are closely connected and the degree of international business cycle comovement has increased significantly.Thirdly,through the empirical study of GVC on the international business cycle comovement,it is found that GVC participation and financial integration have a significant role in promoting the international business cycle comovement,while value-added trade weaken the international business cycle comovement.From the perspective of the “third country effect”,the GVC forward participation “third country effect” can significantly promote the international business cycle comovement,indicating that the downstream demand shock will have a common demand impact on the two countries(regions)through the international production chain,thus enhancing the business cycle comovement of the two countries.The GVC backward participation “third country effect” and value-added trade “third country effect” can weaken the international business cycle comovement.Fourth,the impact of GVC on the international business cycle comovement is heterogeneous in different time periods,between different regions,and between countries with different levels of economic development.First,after the 2008 financial crisis,the negative influence of value-added trade and the value-added trade “third country effect” on the international business cycle comovement has become weaker;The negative influence of GVC backward participation “third country effect” on the international business cycle comovement has been further Enhanced.Secondly,GVC participation has a significant positive impact on the business cycle comovement between countries(regions)outside the three value chain systems,and a significant negative impact on the business cycle comovement between countries(regions)inside the three value chain systems;GVC forward participation “third country effect” has a greater role in promoting the business cycle comovement between countries(regions)in the three value chain systems.Finally,the economic development level gap has a significant negative adjustment effect on the impact of the value-added trade intensity and GVC forward participation “third country effect” on the international business cycle comovement;The economic development level gap has a significant positive adjustment effect on the the impact of GVC backward participation “third country effect” and value-added trade “third country effect” on the international business cycle comovement.Fifth,through the empirical study of GVC on the business cycle comovement between China and its trading partners,it is found that GVC participation,valueadded trade,GVC forward participation “third country effect”,GVC backward participation “third country effect”,value-added trade “third country effect” can promote the business cycle comovement between China and its trading partners.This indicates that GVC has positive influence on the business cycle comovement between China and its trading partners.The business cycle comovement between China and its trading partners is not only caused by existing bilateral trade links,but also due to the two countries in a similar position in the GVC,thus exposed to common supply shocks or demand shocks.Sixth,there is heterogeneity in the impact of GVC on the business cycle comovement between China and its trading partners.In terms of time heterogeneity,after the 2008 financial crisis,the positive impact of value-added trade,GVC forward participation “third country effect”,GVC backward participation “third country effect” and value-added trade “third country effect” on the business cycle comovement between China and its trading partners became stronger;The positive impact of GVC participation on the business cycle comovement between China and its trading partners became weaker.In terms of regional heterogeneity,GVC participation and GVC backward participation “third country effect” have stronger positive influence on the business cycle comovement between China and its trading partners outside three value chain systems;GVC forward participation “third country effect” has stronger positive influence on the business cycle comovement between China and its trading partners inside the three value chain systems.In terms of the heterogeneity of economic development level,the gap of economic development level has a significant positive adjustment effect on the impact of GVC forward participation “third country effect” and value-added trade “third country effect” on the business cycle comovement between China and its trading partners.In terms of industry heterogeneity,inter-industry GVC participation and valueadded trade,intra-industry GVC forward participation “third country effect” and GVC backward participation “third country effect” have stronger positive effects on bilateral business cycle comovement.In addition,GVC have an asymmetric impact on the business cycle comovement between China and its trading partners.The main values of this study are as follows: first,compared with previous studies on the impact of GVC participation on the international business cycle comovement,this paper further analyzes the influence mechanism and degree of“third country effect” on the international business cycle comovement,and expands the existing research framework on GVC;Second,it helps China accurately judge the situation of international business cycle comovement under the background of division of GVC,formulate targeted international economic and trade policies according to the fluctuations of international business cycles,and improve the effectiveness of policy making.Third,it helps to promote the establishment of economic policy coordination mechanisms among major and non-major trading partners in the world,and alleviates policy misjudgments caused by traditional“statistical illusion”.The innovation points of this paper are as follows: First,most of the existing studies only focus on the impact of bilateral value chain embedding on bilateral business cycle comovement,and do not consider the impact of “third country effect”under GVC.Using the input-output model of multi-country and multi-industry,this paper discusses the impact of GVC on the international business cycle comovement from two aspects of supply shock and demand shock.At the same time,it also puts forward the transmission mechanism of GVC forward participation “third country effect”,GVC backward participation “third country effect” and value-added trade“third country effect” affecting the international business cycle comovement,enriching and improving the existing research content.Secondly,this paper empirically tests the impact of GVC on the international business cycle comovement.Most of the previous studies conducted empirical tests on the impact of GVC participation on the international business cycle comovement.This paper conducted more comprehensive empirical tests on the impact of GVC participation,GVC forward participation “third country effect”,GVC backward participation “third country effect” and value-added trade “third country effect” on international business cycle comovement,in order to fully grasp the impact of GVC on the international business cycle comovement.Thirdly,this paper empirically tests the impact of GVC on the business cycle comovement between China and its trading partners.Most of the previous studies used country-level data,and did not consider the impact of the “third country effect” of GVC on the business cycle comovement between China and its trading partners.Using China's bilateral industry level trade data,this paper empirical analyzes the impact of GVC on the business cycle comovement between China and its trading partners,and its heterogeneity of time,regional,economic development level and industry,and further investigates the impact of GVC on the asymmetric comovement of international business cycle.