Template-Type: ReDIF-Paper 1.0
Author-Name: Raphael Auer
Author-X-Name-First: Raphael 
Author-X-Name-Last: Auer
Author-Name: Bruce Muneaki Iwadate
Author-X-Name-First: Bruce Muneaki 
Author-X-Name-Last: Iwadate
Author-Name: Andreas Schrimpf
Author-X-Name-First: Andreas 
Author-X-Name-Last: Schrimpf
Author-Name: Alexander F. Wagner
Author-X-Name-First: Alexander F.
Author-X-Name-Last: Wagner
Title: Global production linkages and stock market co-movement
Abstract: Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in real integration – in particular global value chains – and equity market comovement. This also holds when controlling for financial openness and other factors that could confound the role of real openness. These results suggest that supply chain disruptions, for instance due to political tensions and the COVID-19 crisis, might also affect the interconnections between stock markets via rippling through the global production network.
Length: 51 pages
Creation-Date: 2022-02
File-URL: https://www.bis.org/publ/work1003.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1003.htm
File-Format: text/html
Number: 1003
Keywords: financial integration, global value chains, international asset pricing, international trade, real integration, spillovers, stock market comovement, supply chains.
Classification-JEL: F10, F36, F65, G10, G12, G15.
Handle: RePEc:bis:biswps:1003