Global production linkages and stock market co-movement

Raphael Auer, Bruce Muneaki Iwadate, Andreas Schrimpf and Alexander Wagner

No 1003, BIS Working Papers from Bank for International Settlements

Abstract: Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in real integration – in particular global value chains – and equity market comovement. This also holds when controlling for financial openness and other factors that could confound the role of real openness. These results suggest that supply chain disruptions, for instance due to political tensions and the COVID-19 crisis, might also affect the interconnections between stock markets via rippling through the global production network.

Keywords: financial integration; global value chains; international asset pricing; international trade; real integration; spillovers; stock market comovement; supply chains. (search for similar items in EconPapers)
JEL-codes: F10 F36 F65 G10 G12 G15 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022-02
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-int and nep-rmg
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Related works:
Working Paper: Global Production Linkages and Stock Market Comovement (2023)
Working Paper: Global Production Linkages and Stock Market Comovement (2023)
Working Paper: Global Production Linkages and Stock Market Comovement (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1003

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