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1. Demand and Supply Shocks of COVID-19 and International Production Networks: Evidence from Japan’s Machinery Trade

Author:
Mitsuyo Ando
Publication Date:
03-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper investigated the impacts of COVID-19 on international production networks in machinery sectors by shedding light on negative supply shocks, negative demand shocks, and positive demand shocks. Specifically, we examined changes in trade in the periods of falling trade during the first wave of COVID-19 using Japan’s machinery trade at the most disaggregated level and decomposed them into two intensive margins, i.e. the quantity effect and the price effect, and two extensive margins, i.e. the entry effect and the exit effect. Our empirical results demonstrated that i) trade relationships for parts and components are robust, and international production networks are almost intact, so far; ii) the intensive margin, mostly the negative quantity effect, induces the largest negative effects in the transport equipment sector amongst four machinery sectors; iii) positive demand shocks for specific products that are related to teleworking, disinfection, and stay-home activities partially explain sectoral differences; iv) direct negative supply shocks from China, suggested by a negative quantity effect and a positive price effect, exist in February 2020, with possible indirect negative supply shocks and substitution of source countries; and v) negative demand shocks are confirmed from negative quantity and price effects in many cases. As of October 2020, Japan’s machinery trade seems to have largely recovered. If the COVID-19 pandemic lasts long, however, prolonged negative demand shocks would hurt production networks in East Asia.
Topic:
Demand, Manufacturing, Economic Development, Pandemic, Industry, COVID-19, and Supply
Political Geography:
Japan and Asia

2. Demand and Supply Shocks of COVID-19 and International Production Networks: Evidence from Japan’s Machinery Trade

Author:
Mitsuyo Ando
Publication Date:
03-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper investigated the impacts of COVID-19 on international production networks in machinery sectors by shedding light on negative supply shocks, negative demand shocks, and positive demand shocks. Specifically, we examined changes in trade in the periods of falling trade during the first wave of COVID-19 using Japan’s machinery trade at the most disaggregated level and decomposed them into two intensive margins, i.e. the quantity effect and the price effect, and two extensive margins, i.e. the entry effect and the exit effect. Our empirical results demonstrated that i) trade relationships for parts and components are robust, and international production networks are almost intact, so far; ii) the intensive margin, mostly the negative quantity effect, induces the largest negative effects in the transport equipment sector amongst four machinery sectors; iii) positive demand shocks for specific products that are related to teleworking, disinfection, and stay-home activities partially explain sectoral differences; iv) direct negative supply shocks from China, suggested by a negative quantity effect and a positive price effect, exist in February 2020, with possible indirect negative supply shocks and substitution of source countries; and v) negative demand shocks are confirmed from negative quantity and price effects in many cases. As of October 2020, Japan’s machinery trade seems to have largely recovered. If the COVID-19 pandemic lasts long, however, prolonged negative demand shocks would hurt production networks in East Asia.
Topic:
Demand, Manufacturing, Economic Development, Pandemic, Industry, COVID-19, and Supply
Political Geography:
Japan and Asia

3. Demand and Supply Shocks of COVID-19 and International Production Networks: Evidence from Japan’s Machinery Trade

Author:
Mitsuyo Ando
Publication Date:
03-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper investigated the impacts of COVID-19 on international production networks in machinery sectors by shedding light on negative supply shocks, negative demand shocks, and positive demand shocks. Specifically, we examined changes in trade in the periods of falling trade during the first wave of COVID-19 using Japan’s machinery trade at the most disaggregated level and decomposed them into two intensive margins, i.e. the quantity effect and the price effect, and two extensive margins, i.e. the entry effect and the exit effect. Our empirical results demonstrated that i) trade relationships for parts and components are robust, and international production networks are almost intact, so far; ii) the intensive margin, mostly the negative quantity effect, induces the largest negative effects in the transport equipment sector amongst four machinery sectors; iii) positive demand shocks for specific products that are related to teleworking, disinfection, and stay-home activities partially explain sectoral differences; iv) direct negative supply shocks from China, suggested by a negative quantity effect and a positive price effect, exist in February 2020, with possible indirect negative supply shocks and substitution of source countries; and v) negative demand shocks are confirmed from negative quantity and price effects in many cases. As of October 2020, Japan’s machinery trade seems to have largely recovered. If the COVID-19 pandemic lasts long, however, prolonged negative demand shocks would hurt production networks in East Asia.
Topic:
Demand, Manufacturing, Economic Development, Pandemic, Industry, COVID-19, and Supply
Political Geography:
Japan and Asia

4. Potential for India’s Entry into Factory Asia: Some Casual Findings from International Trade Data

Author:
Mitsuyo Ando, Kenta Yamanouchi, and Fukunari Kimura
Publication Date:
06-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite its impressive economic growth in the past few decades, India is slow in adopting a task-by-task international division of labour or international production networks (IPNs). Using international trade data for international comparison from multiple angles, this paper visualises the position of India – particularly in machinery IPNs and information and communication technology (ICT) services. Although machinery industries are at the centre of IPNs in East Asia, the paper clearly visualises that India has not yet participated in Factory Asia. Rather, trade data indicate that India is still engaged in import-substituting industrialisation. The paper also argues that ICT services are a strength for the Indian economy, and its competitiveness could be utilised effectively by combining new technologies with traditional industries such as manufacturing. India still has huge potential for utilising the mechanics of a new international division of labour to accelerate economic growth, innovation, and poverty alleviation.
Topic:
Globalization, International Trade and Finance, Labor Issues, Manufacturing, Industry, and Global Value Chains
Political Geography:
India and Asia