Unravelling the dynamics of trade policy uncertainty and China’s backward integration
DOI:
https://doi.org/10.24191/jeeir.v12i1.757Keywords:
Trade Policy Uncertainty, Global Value Chains, Backward Integration, Dynamic ARDL, Non-Linear ARDL, ChinaAbstract
This paper studies the dynamics of trade policy uncertainty and China’s backward integration. Theoretical and empirical investigations show that there are numerous benefits accrued to participation in backward integration. However, empirical findings on the effect of trade policy uncertainty on backward integration are non-existence. Therefore, this paper adds to the existing literature on global value chains and the impact of trade policy uncertainty. An empirical investigation was conducted through the use of the dynamic autoregressive distributive lag on data covering the period 2000Q1–2018Q4. Findings show that trade policy uncertainty (TPU) and the real interest rate have significant short-term and long-term negative effects on China’s backward linkage (foreign value added). External debt has a significant short-run positive effect on backward integration. The findings further show that foreign direct investment has significant short-run and long-run positive effects on backward integration.
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