Have Global Value Chains Contributed to Global Imbalances?

31 Pages Posted: 22 Dec 2015

See all articles by Jane Haltmaier

Jane Haltmaier

Board of Governors of the Federal Reserve System

Date Written: 2015-12-18

Abstract

Global value chains (GVCs) have grown rapidly over the past several decades. Over the same period, the aggregate value of current account imbalances has risen substantially. This paper looks at whether these developments are related. While there is a sizable literature that has documented the rise of global production networks, there have been few attempts to assess the potential effect on global imbalances. The paper uses measures of GVCs developed in the literature in panel regressions to assess the effect on global imbalances over the period 1995-2011. It is argued that these variables should be entered as a product rather than individually and that they should be lagged, not contemporaneous with the change in current account balances. The results suggest that GVC position weighted by participation and trade share is negatively related to a country's current account balance, i.e., moving upstream in the production process is negative for a country's current account. However, the effects on global imbalances over the period studied appear to be small.

Keywords: Global value chains, current account balances

JEL Classification: F1, F4

Suggested Citation

Haltmaier, Jane, Have Global Value Chains Contributed to Global Imbalances? (2015-12-18). FRB International Finance Discussion Paper No. 1154. Available at SSRN: https://ssrn.com/abstract=2705738 or http://dx.doi.org/10.17016/IFDP.2015.1154

Jane Haltmaier (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2374 (Phone)
202-736-5638 (Fax)

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