Global Value Chain Linkages and Business Cycle Comovement: Evidence From Cross-Country Panel Data

Abstract

We empirically investigate the impact of global value chain (GVC) linkages on business cycle comovement by using the cross-country panel data covering 43 developing and developed countries over the period 2000–2014 obtained from the World Input-Output Database 2016 Release (WIOD 2016). We find that GVC linkages have a positive impact on business cycle comovement. We also find that the impact of GVC linkages in final goods is larger than that of GVC linkages in advanced intermediate goods and then GVC linkages in basic intermediate goods, indicating the moderating effect of the production length. Moreover, the impact of GVC linkages on business cycle comovement between developing and developed countries is highly significant, implying that GVC linkages may narrow the growth gap between developing and developed countries. These findings suggest the importance of the GVC specialization, the South-North cooperation, and the international risk management.