Do international investment and trade flows show any signs of fragmentation?

Juuso Kaaresvirta, Eeva Kerola and Riikka Nuutilainen

No 12/2023, BOFIT Policy Briefs from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: This paper utilizes available aggregate country-level data, as well as bilateral trade and investment data, to identify signs of fragmentation in trade and investment patterns among ten major trading countries or regional trading blocks. We compare the trade and investment trends in the years during the US-China trade war and increase in geopolitical tensions (2018-2021) against the years preceding the trade war (2014-2017). Our analysis generally corroborates findings in the existing literature. Bilateral flows between the US and China have been damaged, but there is little evidence of wider fragmentation or that the world is splitting into competing spheres. Even focusing on technologyintensive manufactures that are increasingly subject to trade restrictions, we find no evidence of broad fragmentation. Our analysis does reveal, however, shifts in global trade and FDI, particularly towards Central and Eastern Europe (CEE) and ASEAN countries. This may reflect a partial reshuffling of global value chains that is a natural outcome of favorable developments in these regions, as well as rising production costs in China. Such shifts do not necessarily reflect global fragmentation driven by geoeconomics factors.

Keywords: Global trade; foreign direct investments; fragmentation (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cna, nep-ifn, nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/276269/1/1858503272.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitb:122023

Access Statistics for this paper

More papers in BOFIT Policy Briefs from Bank of Finland Institute for Emerging Economies (BOFIT) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().