European Parliament Library

Putting the Parts Together :, Trade, Vertical Linkages, and Business Cycle Comovement, Andrei Levchenko, Julian Di Giovanni

Countries that trade more with each other exhibit higher business cycle correlation. This paper examines the mechanisms underlying this relationship using a large cross-country industry-level panel dataset of manufacturing production and trade. We show that sector pairs that experience more bilateral trade exhibit stronger comovement. Vertical linkages in production are an important explanation behind this effect: bilateral international trade increases comovement significantly more in cross-border industry pairs that use each other as intermediate inputs. Our estimates imply that these vertical production linkages account for some 30% of the total impact of bilateral trade on the business cycle correlation
Table Of Contents
Contents; I. Introduction; II. Empirical Strategy and Data; A. Sector-Level and Aggregate Comovement; B. Vertical Linkages and Transmission of Shocks; C. Identification and Interpretation; D. Data and Summary Statistics; III. Results; A. Vertical Production Linkages, Trade, and Comovement; IV. The Impact of Sector-Level Trade on Aggregate Comovement; A. Heterogeneity Across Country Pairs; V. Conclusion; Appendix; I. Logs and Levels Estimates; Tables; 1. Impact of Trade on Comovement at the Sector-Level: Pooled Estimates
Literary Form
non fiction
"August 2009."
Physical Description
1 online resource (57 p.)
Specific Material Designation
Form Of Item

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