CEPII, Recherche et Expertise sur l'economie mondiale
Do Global Value Chains Amplify Global Imbalances?


Antonia López-Villavicencio
Valérie Mignon

 Highlights :
  • Backward participation in global value chains (GVC) makes a negative contribution to current account balances.
  • No signifi cant indirect effect of GVC on the current account operates through the exchange rate.
  • Backward participation, as well as an increase in intermediate inputs imports, play a key role by boosting exports.
  • Even if exports are increasing, imports are also augmenting with higher GVC participation, which cushions the total GVC effect on current account balances.

 Abstract :
This paper addresses the impact of countries' participation in global value chains (GVCs) on their current account balances. Relying on a panel of 57 advanced and emerging countries, we do not fi nd evidence that GVC participation directly raises economies' current account positions. On the contrary, we show that backward participation makes a negative contribution to current account balances: our results contradict the speculation that current account imbalances of downstream countries are likely to benefi t more from GVC participation than economies which are located further upstream. Moreover, we show that there is no signifi cant indirect effect of GVC on the current account operating through the exchange rate. Finally, our fi ndings indicate that whereas GVC participation boosts exports, this increase is not accompanied by improvements in price competitiveness, nor by higher levels of saving rates.

 Keywords : Global Value Chains | Current Account Imbalances

 JEL : F32, F40, F62
CEPII Working Paper
N°2018-13, September 2018

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