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This study examines the effect of global value chains (GVCs) on the association between gross exports and the exchange rate. To do so, we quantify the composition of the GVCs using output-related measures for sixty-one countries from 2007 to 2020. This approach is better than the existing measures in capturing all the linkages of GVCs. Second, we analyse the importance of GVCs on the link between gross exports and the exchange rate using an econometric technique – the generalised method of moments. Our results show that GVC participation disconnects the exchange rate elasticity of exports. The empirical findings are robust and consistent across the sectors and income groups. Therefore, it is vital for policy-makers to consider the implications of GVCs while devising any policy related to exports. © 2022 The Economic Society of Australia.

School of Management & Entrepreneurship

World University root node

Economic Papers

Global Value Chains and Exchange Rate Disconnect*

Purpose: This paper aims to examine the relationship between global value chains (GVCs) and domestic value-added content (DVA) in a panel of 58 countries for the period 2005–2015. Design/methodology/approach: First, the authors quantify the refined measures of GVC linkages by using the Borin and Mancini (2019) decomposition technique. Second, the authors apply the feasible generalised least squares method to test the relationship between GVCs and DVA empirically. Findings: First, the authors find that GVC links are crucial to the enhancement of DVA. Second, a study at the sectoral level reveals that GVC links in the primary sector raise DVA whilst reducing DVA in the services sector. Third, the authors find that only upstream activities enhance value-added content. Fourth, the authors note the augmenting role played by national policies in mediating the gains associated with GVCs. Finally, the authors note that the outcomes associated with GVCs are consistent when the sample of countries is divided into groups based on income. Practical implications: The results lead us to urge policymakers to promote greater integration of business activities into GVCs to reap their benefits. Originality/value: This paper contributes to the research on the impact of GVCs on DVA by emphasising the significance of the types of GVC activities and policies that improve DVA. © 2021, Emerald Publishing Limited.

Studies in Economics and Finance

Global value chain linkages and domestic value-added content: Empirical evidence

Purpose: The purpose of this paper is to examine the nexus between financial integration and export diversification. Design/methodology/approach: The authors consider 96 economies spanning over the period 1995-2014. To provide broader insights, the authors categorize 96 economies into developed, developing, high and low diversified panels. Both volume and equity-based measures of financial integration are used. The generalized method of moments (GMM) method is used to analyze the link between financial integration and export diversification. Findings: The results derived from GMM indicate that financial integration is a vital factor of export diversification. Further, the findings reveal similar conclusions for developed, developing, high and low diversified panels. Research limitations/implications: The outcome of this study suggests that promoting the financial integration of markets by lowering the restrictions on capital inflows helps countries to lower the risk and diversify their exports. Originality/value: Though there exists enormous literature on export diversification, the nexus between financial integration and export diversification is limited. The present study bridges this research gap. © 2020, Emerald Publishing Limited.

Journal of Financial Economic Policy

Does financial integration drive export diversification? Evidence from a cross-country analysis

This study examines the price convergence across 28 Indian states and 7 union territories at an aggregate and subgroups level over the period 2011–12 to 2017–18. We employ a novel approach of Phillips and Sul panel convergence technique, which accounts for transitional dynamics and heterogeneity in the panel. The results suggest price divergence and evidence of clubs across Indian states at both aggregate and subgroup level. The outcomes of this study help policymakers in addressing the price dispersion across states, which in turn improves the market integration, allocation of resources, and standard of living. © 2020 John Wiley & Sons, Ltd

Journal of Public Affairs

Price dispersion across Indian states: A club convergence analysis

This paper examines the link between trade and economic growth by emphasizing on recent progress of global value chains (GVCs) for a sample of 58 countries over the period 2005–2015. The findings show that trade and in particular trade linked to GVCs spurs economic growth. However, the impact of GVC engagement on economic growth is diverse as we broaden our analysis to sectoral level. The study also notes that the benefits associated with regional value chains are higher. Furthermore, functional specialization in trade also plays a key role in improving growth. Therefore, policies to promote the GVC engagement and strengthening the domestic fundamentals should be the aim for countries to further benefit from trade. © 2021 Informa UK Limited, trading as Taylor & Francis Group.

Applied Economics

Do global value chains enhance or slog economic growth?

This study aims to examine whether the participation of 24 emerging market economies (EMEs) in global value chains (GVCs) enhance the economic upgrading in the form of improvements in domestic value-added exports over the period 1995–2011. To do so, first, the study explores the forward and backward participation in GVCs which shows an increasing level of GVCs participation. Second, this study empirically investigates the impact of GVCs on the domestic value-added exports using panel feasible generalised least squares technique. The results reveal that both forward and backward participation has significantly improved the economic upgrading in case of EMEs. Further, the results show similar findings across several subgroups based on incomes, regions and others. Policies to foster greater GVC participation can help EMEs to tap the potential benefits associated. © 2020 John Wiley & Sons, Ltd.

International Journal of Finance and Economics

Does global value chain participation enhance domestic value-added in exports? Evidence from emerging market economies

Though voluminous empirical studies examine the linkage between energy consumption (EC) and economic growth, the impact of human capital on EC is scarce. This paper investigates this research issue by using annual data of 73 countries over the period 1990–2014. Furthermore, we classify 73 countries based on income (developed, developing and emerging economies) and regions (Asia, Africa, Europe and Latin America). The empirical results indicate that human capital negatively affects EC. This implies that EC can be lowered by improving human capital, which ultimately can help in energy conservation and environmental protection. Policies promoting substitutability between energy inputs and human capital, and structural policies like improving economic efficiency and improving human capital through educational levels can help economies in achieving greater sustainable growth with low EC. © 2020 Organization of the Petroleum Exporting Countries

OPEC Energy Review

Examining the linkage between human capital and energy consumption: cross-country evidence

We investigate the evidence of convergence/divergence in global value chain (GVC) participation across 61 countries from 2005 to 2015, employing the panel club convergence technique. The findings do not support evidence of absolute convergence, but evidence of club convergence. Seven clubs and a non-convergent group are identified, signifying that the types of activities are not uniform across countries, each club following a unique transition path. Further, we examine convergence in the forward and backward participation of GVCs. The findings reveal similar evidence of club convergence. Policies targeting GVCs need to consider the transition path of each club for better outcomes. © 2020 CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), a center for research and expertise on the world economy

International Economics

Cross-country convergence in global value chains: Evidence from club convergence analysis

Purpose: The purpose of this study is to examine whether the electricity consumption patterns across Indian states do converge. Design/methodology/approach: This study considers 18 Indian states spanning over the period 1970-1971 and 2014-2015, using the recently developed Phillips and Sul panel convergence technique that accounts the multiple steady states. Findings: The results provide the following insights. First, the authors find evidence of convergence in electricity consumption among all Indian states. This suggests that electricity consumption patterns for Indian states are converging to a common steady state. Second, to provide broader insights, we further investigate the convergence in electricity consumption among user groups such as agriculture, industry, commercial, domestic and miscellaneous. The results reveal that commercial, domestic and miscellaneous groups are also converging. Third, the non-convergence patterns in agriculture and industry enable us to investigate the possibility of clubs or the multiple common steady states. The results indicate the occurrence of three clubs in case of agriculture and two clubs in case of the industry. Fourth, this study also inspects the relative speed of convergence among the user groups. The results reveal the higher speed of convergence in case of the domestic user group. Practical implications: The findings enable policymakers to formulate an appropriate energy policy to accommodate the future electricity demand across Indian states and prioritize low electricity consumption states so that they receive a greater share. Originality/value: This is the first study that examines the convergence in electricity consumption across Indian states at aggregate and user groups using a new panel club convergence technique. © 2019, Emerald Publishing Limited.

International Journal of Energy Sector Management

Convergence in electricity consumption across Indian states: a disaggregated analysis

Purpose: The primary purpose of this study is to examine whether the classification of industries into the tradable and nontradable matters for the Balassa–Samuelson (BS) effect. Design/methodology/approach: The study uses annual data for 38 countries from 1995 to 2014. To examine whether the classification of industries matter, the study proceeds with two approaches, that is, “traditional” and “benchmark”. Findings: First, by applying panel cointegration tests of Pedroni and Westerlund, the results validate the BS hypothesis. However, the coefficients of long-run elasticities show appreciation of real exchange rate (RER) due to increase in productivity in the case of “traditional approach”, whereas depreciation of RER in the case of “benchmark approach”. Second, by applying the Dumitrescu-Hurlin panel Granger causality test, the results reveal the bi-directional causality among RER and productivity for both the approaches. Further, to provide more insights, the study employs a fixed-effects panel threshold model. The results indicate that increase in productivity leads to both appreciation and depreciation of RER depending on threshold regimes. Practical implications: The study ascertains that the evidence of BS effect depends on the choice of approach considered. However, irrespective of the classification, there exists a BS effect beyond a threshold. Originality/value: Although the BS effect is well established in the literature; there is no study examining the importance of classification of industries at a disaggregated level. Furthermore, there is no consideration of threshold effects. © 2020, Emerald Publishing Limited.

Journal of Economic Studies

Does productivity drive the real exchange rate movements? A re-examination of the Balassa–Samuelson hypothesis

Purpose: The purpose of this paper is to examine the effects of the global value chain (GVC) participation and the associated improvements in labour productivity and employment among 16 Asia-Pacific countries. Design/methodology/approach: First, the indicators of GVC participation are computed using annual multi-region input-output tables over the period 1990-2014. Second, the study examines the long-run association between GVCs and labour productivity through Pedroni (2004) and Westerlund (2007) panel cointegration techniques. Then in the third step, the long-run elasticities are estimated using dynamic ordinary least squares (DOLS) and fixed-random effects models. Finally, the direction of causality is examined using the Dumitrescu and Hurlin (2012) panel causality technique. Findings: The result shows an increasing participation of GVCs among Asia-Pacific countries. The findings also show the long-run relationship between GVCs and labour productivity. The long-run elasticities suggest the positive association of GVCs with labour productivity and employment. Further, the categorization of Asia-Pacific countries based on income groups reveals that improvement in labour productivity and employment outcomes is significantly greater in the case of middle-income countries. Finally, the results from panel causality infer that the direction of causality runs from GVCs to labour productivity and GVCs to employment. Practical implications: The findings enable policymakers to formulate appropriate policies in Asia-Pacific countries to keep the momentum of increasing their participation in GVC for boosting labour productivity and employment gains. Originality/value: To the author’s knowledge, this is the first empirical study examining the spillover effects of GVC on labour productivity and employment in case of Asia-Pacific countries. © 2020, Emerald Publishing Limited.

Global value chain embeddedness, labour productivity and employment in the Asia-Pacific countries

This paper investigates the relationship between sectoral capital-labor ratios, total factor productivity (TFP) and wages based on the contemporary Balassa-Samuelson model. To proceed, first, we identify a tradable and nontradable sector using an average of export to value added ratio for a group of developed and developing countries over the period 2001 to 2014. After accounting for cross-sectional dependence in the data, we find strong evidence that TFP of the tradable sector and wages significantly determines sectoral capital-labor ratios in both developed and developing countries. The long-run elasticities show that improvement in TFP declines the capital-labor ratios, whereas wages increase the capital-labor ratios in both tradable and nontradable sectors across developed and developing countries. © 2020, © 2020 Taylor & Francis Group, LLC.

Emerging Markets Finance and Trade

Is There Any Linkage between Sectoral Capital-labour Ratios, Total Factor Productivity, and Wages?

This study investigates the stationary properties of electricity consumption at the aggregate and user-group levels (agricultural, industrial, commercial, domestic, and miscellaneous) for 18 Indian states over the period 1971-72 to 2015–16. Our analysis employs the two-step Lagrange Multiplier (LM) and the three-step Residual Augmented Least Square Lagrange Multiplier (RALS-LM) unit root tests. The results obtained suggest evidence of stationarity at aggregate and user groups in most states. The findings infer that shocks to electricity consumption in the Indian states have only a temporary effect. These results suggest that electricity demand can be modelled for forecasting and policymaking. © 2019 Elsevier Ltd

Utilities Policy

Do shocks to electricity consumption revert to its equilibrium? Evidence from Indian states

Purpose: This paper aims to investigate whether improvement in human capital can foster energy conservation by reducing the energy consumption in India using annual data from 1980 to 2014. Further, this study examines the relationship between human capital and various forms of energy consumption such as electricity, coal, natural gas, hydrocarbon gas and petroleum consumption. Design/methodology/approach: To attain the objective, the study investigates this relation through the auto-regressive distributed lag model (ARDL) technique to find a long-run and short-run relationship. Second, to check the robustness of the results, the authors use alternative econometric methods such as dynamic ordinary least squares and fully modified dynamic ordinary least squares. Findings: The results reveal a negative relationship between human capital and energy consumption, which implies that improvement in human capital lowers the energy consumption and various forms energy consumption, except for petroleum consumption. The results derived from ARDL show that there exists a long-run and short-run association between human capital and energy consumption. The results are consistent across the econometric techniques. Practical implications: Because G20 countries including India aim at reducing carbon emission to a certain level, this study provides an insight that by emphasizing on human capital, India can reduce energy consumption, which would foster energy conservation. Originality/value: To the best of the authors’ knowledge, this the first study in India which attempts to examine the effect of human capital on energy consumption and its various forms. © 2018, Emerald Publishing Limited.

Does human capital matter for reduction in energy consumption in India?

We investigate consumer price convergence for 82 Indonesian cities using monthly data from 2014 to 2019. To do so, we employ recent techniques of club convergence and weak sigma convergence. The results reveal, first, consumer price divergence, implying price rigidities across the cities. Second, we find four clubs, suggesting that Indonesian cities converge along four unique transition paths. Third, we find weak evidence of consumer price convergence, suggesting that prices among Indonesian cities adjust, but not freely. Policy should therefore consider unique convergence paths for each club to promote stronger consumer price convergence. Copyright © 2019 Bank Indonesia Institute.