Impacts of global value chain participation on current account imbalance: Evidence of ASEAN countries


Authors

  • Tran Manh Ha Banking Academy of Vietnam
DOI: https://doi.org/10.57110/jebvn.v4i1.293

Keywords:

Global value chain, current account imbalance, ASEAN

Abstract

In the past decade, the tendency of deeper participation in the global value chain and current account imbalance are two prominent features of the global economy. Using data of the South-East Asia (ASEAN) countries from 2007 to 2019 and the ordinary least squares (OLS) regression model, this research aims to find the correlation between these two phenomena in these countries. The results of the study show that if the participation in the global value chain will impact the current account balance of those ASEAN countries. Specifically, if a country participates in the forward linkage of the value chain, the country’s current account will increase significantly. Conversely, if the country’s position in the supply chain is backward linkage, the current account will be negatively impacted. To deal with current account imbalance, ASEAN governments need to implement a set of policies to strengthen forward linkages and control backward linkages.

References

Aizenman, J., & Sun, Y. (2010). Globalization and the sustainability of large current account imbalances: Size matters. Journal of Macroeconomics, 32(1), 35-44. https://doi.org/10.1016/j.jmacro.2009.11.001

Blanchard, O., & Milesi-Ferretti, G. M. (2012). (Why) should current account balances be reduced? IMF Economic Review, 60(1), 139–150. https://doi.org/10.1057/imfer.2012.2

Bousnina, R., & Gabsi, F. B. (2022). Global value chain participation, institutional quality and current account imbalances in the MENA region. Economic Research Forum (ERF), Working Paper No. 1556.

Brumm, J., et al. (2019). Global value chain participation and current account imbalances. Journal of International Money and Finance, 97, 111–124. https://doi.org/10.1016/j.jimonfin.2019.01.018

Chaudhary, S., & Khoi, N. V. (2019). The position of Vietnam in the global value chain. Vietnam Journal of Social Sciences & Humanities, 5(3), 292-313.

Felice, G., & Tajoli, L. (2021). Trade balances and global value chains: Is there a link? Structural Change and Economic Dynamics, 59, 228–246. https://doi.org/10.1016/j.strueco.2021.08.013

Fernandes, A. M., Kee, H. L., & Winkler, D. (2022). Determinants of global value chain participation: Cross-country evidence. The World Bank Economic Review, 36(2), 329–360. https://doi.org/10.1093/wber/lhab017

Freund, C., & Warnock, F. (2007). Current account deficits in industrial countries: The bigger they are, the harder they fall? In G7 Current Account Imbalances: Sustainability and Adjustment (pp. 133–168). University of Chicago Press. https://www.nber.org/system/files/chapters/c0130/c0130.pdf

Ghosh, A., & Ramakrishnan, U. (2012). Current Account Deficits: Is there a Problem?https://www.elibrary.imf.org/openurl?genre=article&issn=0015-1947&volume=2017&issue=005&artnum=A023

Gokten, S., & Karatepe, S. (2016). Electricity consumption and economic growth: A causality analysis for Turkey in the frame of import-based energy consumption and current account deficit. Energy Sources, Part B: Economics, Planning, and Policy, 11(4), 385-389. https://doi.org/10.1080/15567249.2012.666332

Haltmaier, J. (2015). Have global value chains contributed to global imbalances? International Finance Discussion Papers No. 1154. Board of Governors of the Federal Reserve System (U.S.).

Johnson, R. C. (2018). Measuring global value chains. Annual Review of Economics, 10(1), 207–236. https://doi.org/10.1146/annurev-economics-080217-053600

Kim, D., Goo, J., & Jung, J. (2022). Examination of trade imbalance between Korea and Mexico from global value chain perspective. Ibero-America Research, 33(1), 25–51.

López-Villavicencio, A., & Mignon, V. (2021). Does backward participation in global value chains affect countries’ current account position? Review of World Economics, 157, 65-86. https://doi.org/10.1007/s10290-020-00390-2

Mello, L. de, Padoan, P. C., & Rousová, L. F. (2011). The growth effect of current-account reversals. VoxEU.org. https://voxeu.org/article/growth-effect-current-account-reversals

Nguyen, T. H. T., Nguyen, N. A., & Nguyen, D. C. (2011). Current account deficit: Causes and solutions. Depocen Working Paper Series.

Obstfeld, M., & Rogoff, K. S. (2005). Global current account imbalances and exchange rate adjustments. Brookings Papers on Economic Activity, 2005(1), 67-146. https://doi.org/10.1353/eca.2005.0020

Singh, T. (2015). Sustainability of current account deficits in India: An intertemporal perspective. Applied Economics, 1–18. https://doi.org/10.1080/00036846.2015.1039701

Unger, R. (2017). Asymmetric credit growth and current account imbalances in the euro area. Journal of International Money and Finance, 73, 435-451. https://doi.org/10.1016/j.jimonfin.2017.02.017

World Bank Group. (2022). Climate and development: An agenda for action - emerging insights from World Bank Group 2021–22 Country Climate and Development Reports. Washington, DC: World Bank.

Downloads

Download data is not yet available.

Downloads

Published

25-02-2024

Abstract View

349

PDF Downloaded

140

How to Cite

Tran Manh Ha. (2024). Impacts of global value chain participation on current account imbalance: Evidence of ASEAN countries. VNU JOURNAL OF ECONOMICS AND BUSINESS, 4(1), 106. https://doi.org/10.57110/jebvn.v4i1.293

Issue

Section

Original Article