The Impact of Global Value Chain Participation on Trade Balance: Evidence from Heterogeneous Emerging Countries

نوع المستند : المقالة الأصلية

المؤلف

Assistant Professor of Economics Faculty of Economic Studies and Political Science Alexandria University

10.21608/acj.2025.450965

المستخلص

This paper investigates the impact of participation in global value chains (GVCs) on the trade balance of six middle-income emerging countries—Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa (CIVETS)—from 1995 to 2020. The study employs heterogeneous panel models, including the Augmented Mean Group (AMG) and Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) models to address heterogeneity and cross-sectional dependence. In addition, robustness checks utilize the Dynamic Common Correlated Effects Mean Group (DCCE-MG) and Group-Mean Fully Modified Ordinary Least Squares (GM-FMOLS) estimators. The findings of the paper show that disaggregating GVC participation into backward and forward participation unveils contrasting effects. Backward GVC participation affects the trade balance of CIVETS countries negatively in both the short and long run, likely due to increased import dependency on capital-intensive inputs. Conversely, forward GVC participation positively affects trade balance, indicating potential benefits from moving up the value chain. By comparing the effects of the two GVC participation forms, the positive effects of forward GVC dominate. Country-specific results show that backward participation has a negative effect on the trade balances of Colombia, Indonesia, Vietnam, and South Africa, while forward participation contributes positively to the trade balance in Colombia, Indonesia, Vietnam, and Egypt. The results of this paper offer important insights for policymakers seeking to strategically position their economies within GVCs to maximize trade benefits.

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