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Putting the Parts Together Trade, Vertical Linkages, and Business Cycle Comovement

Countries that trade more with each other exhibit higher business cycle correlation. This paper examines the mechanisms underlying this relationship using a large cross-country industry-level panel dataset of manufacturing production and trade. We show that sector pairs that experience more bilatera...

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Bibliographic Details
Main Author: Levchenko, Andrei
Other Authors: Di Giovanni, Julian
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2009
Series:IMF Working Papers
Subjects:
Manufacturing Industries
Business Cycles
International Trade Organizations
Trade Policy
Manufacturing
Trade: General
Exports And Imports
Plurilateral Trade
International Economics
Industry Studies: Manufacturing: General
Production; Economic Theory
Industries: Manufacturing
Macroeconomics: Production
International Trade
Exports
Economic Growth
Macroeconomics
Prices, Business Fluctuations, And Cycles: General (includes Measurement And Data)
Production Growth
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Countries that trade more with each other exhibit higher business cycle correlation. This paper examines the mechanisms underlying this relationship using a large cross-country industry-level panel dataset of manufacturing production and trade. We show that sector pairs that experience more bilateral trade exhibit stronger comovement. Vertical linkages in production are an important explanation behind this effect: bilateral international trade increases comovement significantly more in cross-border industry pairs that use each other as intermediate inputs. Our estimates imply that these vertical production linkages account for some 30% of the total impact of bilateral trade on the business cycle correlation
Physical Description:55 pages
ISBN:9781451873283

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