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Global supply chain interdependence and shock amplification – evidence from Covid lockdowns

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  • Sally Chen
  • Eric Tsang
  • Leanne Si Ying Zhang

Abstract

Supply disruptions from the Covid-19 pandemic raise questions about the benefits and costs of global value chain (GVC) participation and the possibility that supply chain networks may have shifted during this period. Using firm-level data on supply chain linkages, we document the evolution of GVCs during the pandemic by comparing GVC network diagrams and firms' shipment data over the course of the pandemic. Furthermore, we study how such linkages affected equity investors' reaction to pandemicrelated disruptions. Our findings suggest that GVCs contracted following the pandemic outbreak and were slow to recover in some sectors. We also find that firms with GVC links to countries undergoing Covid-related lockdowns suffered larger stock price losses than those without such links. In addition, sectoral responses to lockdown announcements varied, underscoring the need to consider sectoral differences in the study of GVC shifts.

Suggested Citation

  • Sally Chen & Eric Tsang & Leanne Si Ying Zhang, 2023. "Global supply chain interdependence and shock amplification – evidence from Covid lockdowns," BIS Working Papers 1123, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1123
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    1. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 2021. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 1255-1321.
    2. Zhang, Si Ying, 2021. "Using equity market reactions and network analysis to infer global supply chain interdependencies in the context of COVID-19," Journal of Economics and Business, Elsevier, vol. 115(C).
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    More about this item

    Keywords

    supply chain; supply networks; amplification; equity prices;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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