Does Economic Policy Uncertainty Impact Firm GVC Participation? Microdata Evidence from India

Ketan Reddy, Subash Sasidharan and Shandre Mugan Thangavelu
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Ketan Reddy: Indian Institute of Management Raipur, India
Subash Sasidharan: Indian Institute of Technology, Madras, Chennai, India.
Shandre Mugan Thangavelu: Sunway University,The University of Adelaide

No DP-2024-23, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: In this study, we examine the implications of economic policy uncertainty on global value chain (GVC) participation and the integration of Indian manufacturing firms using firm-level data. Using panel data from 2004 to 2021, we find that economic policy uncertainty (EPU) impedes GVC participation and firm integration. Further, we find that the impact of EPU on GVC participation operates through the financial constraint channel with highly leveraged and low-liquidity firms. Using survival analysis, we also highlight that higher EPU results in higher exit from GVCs and reduces entry into GVCs.

Keywords: Economic policy uncertainty; GVC participation; Manufacturing firms (search for similar items in EconPapers)
Date: 2024-09-26
New Economics Papers: this item is included in nep-bec, nep-dev and nep-int
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