Resolving the trade comovement puzzle at the margin of global value chains
Purpose – This paper investigates the crucial role that the trade of intermediate goods plays in elucidating trade-output synchronization. We specifically highlight the significance of incorporating intermediate trade, particularly concerning the dominance of forward linkages in the global value cha...
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| Language: | English |
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Emerald Publishing
2025-04-01
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| Series: | International Trade, Politics and Development |
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| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/ITPD-05-2024-0029/full/pdf |
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| author | Bongseok Choi |
| author_facet | Bongseok Choi |
| author_sort | Bongseok Choi |
| collection | DOAJ |
| description | Purpose – This paper investigates the crucial role that the trade of intermediate goods plays in elucidating trade-output synchronization. We specifically highlight the significance of incorporating intermediate trade, particularly concerning the dominance of forward linkages in the global value chains (GVCs) of countries producing intermediate goods. Design/methodology/approach – We extend Johnson (2014) international real business cycle (IRBC) model to integrate the foreign value added by intermediate exporters within a forward-linkage GVC. Findings – Model simulations indicate that the trade of intermediate goods accounts for around 31–33% of observed trade-output synchronization. Notably, the inclusion of value-added rents in GVCs within intermediate goods trade boosts the explanatory power to 55%. Research limitations/implications – Although adding input trade information does not replicate the empirical finding enough to resolve the trade-comovement puzzle within the IRBC-style framework, as Johnson (2014) pointed, this might highlight the limitations of the framework itself. The limitations of both our work and Johnson (2014) suggest that a more endogenous mechanism that correlates comovement with trade independently of the correlation between trade and comovement of TFPs should be introduced in the IRBC model. Originality/value – Our paper extends Johnson (2014) IRBC model to incorporate the foreign value added to intermediate trade within forward-linkage GVCs. The model’s explanatory power in resolving the trade comovement puzzle has improved. |
| format | Article |
| id | doaj-art-e2ba84e18a4e401d8e8d4d252c865c74 |
| institution | DOAJ |
| issn | 2586-3932 2632-122X |
| language | English |
| publishDate | 2025-04-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | International Trade, Politics and Development |
| spelling | doaj-art-e2ba84e18a4e401d8e8d4d252c865c742025-08-20T03:07:24ZengEmerald PublishingInternational Trade, Politics and Development2586-39322632-122X2025-04-0191253510.1108/ITPD-05-2024-0029Resolving the trade comovement puzzle at the margin of global value chainsBongseok Choi0Department of Commerce and Finance, Kookmin University, Seoul, South KoreaPurpose – This paper investigates the crucial role that the trade of intermediate goods plays in elucidating trade-output synchronization. We specifically highlight the significance of incorporating intermediate trade, particularly concerning the dominance of forward linkages in the global value chains (GVCs) of countries producing intermediate goods. Design/methodology/approach – We extend Johnson (2014) international real business cycle (IRBC) model to integrate the foreign value added by intermediate exporters within a forward-linkage GVC. Findings – Model simulations indicate that the trade of intermediate goods accounts for around 31–33% of observed trade-output synchronization. Notably, the inclusion of value-added rents in GVCs within intermediate goods trade boosts the explanatory power to 55%. Research limitations/implications – Although adding input trade information does not replicate the empirical finding enough to resolve the trade-comovement puzzle within the IRBC-style framework, as Johnson (2014) pointed, this might highlight the limitations of the framework itself. The limitations of both our work and Johnson (2014) suggest that a more endogenous mechanism that correlates comovement with trade independently of the correlation between trade and comovement of TFPs should be introduced in the IRBC model. Originality/value – Our paper extends Johnson (2014) IRBC model to incorporate the foreign value added to intermediate trade within forward-linkage GVCs. The model’s explanatory power in resolving the trade comovement puzzle has improved.https://www.emerald.com/insight/content/doi/10.1108/ITPD-05-2024-0029/full/pdfTrade comovement puzzleInternational real business cycleGlobal value chainIntermediate trade |
| spellingShingle | Bongseok Choi Resolving the trade comovement puzzle at the margin of global value chains International Trade, Politics and Development Trade comovement puzzle International real business cycle Global value chain Intermediate trade |
| title | Resolving the trade comovement puzzle at the margin of global value chains |
| title_full | Resolving the trade comovement puzzle at the margin of global value chains |
| title_fullStr | Resolving the trade comovement puzzle at the margin of global value chains |
| title_full_unstemmed | Resolving the trade comovement puzzle at the margin of global value chains |
| title_short | Resolving the trade comovement puzzle at the margin of global value chains |
| title_sort | resolving the trade comovement puzzle at the margin of global value chains |
| topic | Trade comovement puzzle International real business cycle Global value chain Intermediate trade |
| url | https://www.emerald.com/insight/content/doi/10.1108/ITPD-05-2024-0029/full/pdf |
| work_keys_str_mv | AT bongseokchoi resolvingthetradecomovementpuzzleatthemarginofglobalvaluechains |