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Global value chain participation and current account imbalances

Johannes Brumm, Georgios Georgiadis, Johannes Gräb () and Fabian Trottner

Journal of International Money and Finance, 2019, vol. 97, issue C, 111-124

Abstract: This paper draws a causal link between increased levels of global value chain participation (GVCP) and increases in a country’s current account. We document empirically that stronger GVCP is associated with larger current account balances. According to our estimates, cross-country differences in GVCP reduce the hitherto unexplained part of current account imbalances substantially for some countries. For example, for the United States and Japan the unexplained part of the current account falls by 75% and 50% over the sample period when controlling for their GVCP relative to the rest of the world; for Germany, the unexplained part of the current account deficit falls by an average of 10%.

Keywords: Global value chain participation; Current account imbalances; EBA model (search for similar items in EconPapers)
JEL-codes: F32 F41 F62 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jimonfin.2019.01.018

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