Does too much finance suppress a country’s participation in the global value chains?

Songlin Zeng, Zhenyi Wang, C. Hueng and Sainan Huang

Applied Economics Letters, 2022, vol. 29, issue 16, 1504-1508

Abstract: Using a dynamic panel threshold model, we find a nonlinear effect of financial development on participation in the global value chains for 92 countries. The effect is positive below a threshold and turns negative above it. We provide evidence supporting our explanation that when a country’s financial system develops to a certain level, it serves foreign buyers by engaging more in outward foreign direct investments instead of enhancing its participation in the global value chains.

Date: 2022
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DOI: 10.1080/13504851.2021.1940081

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