Openness and Volatility in Global Production Network

This project takes on a business cycle point of view and quests after the impact of deglobalization on domestic macroeconomic fluctuations. Consider an international economy where the macroeconomic fluctuations are driven by two kinds of shocks: country-level shocks and sector-level shocks. Meanwhile, sectors in different countries are connected through the global production and trade networks which play an important role in transmitting shocks and amplifying the fluctuations. With this framework, the project will then proceed in four stages. First, I will derive an additive decomposition of sector-country specific shocks into components capturing sector common shocks and country common shocks.
Second, I will quantify economy's response to sector-country specific shocks in a parsimonious multi-country, multi-sector business cycle model.
Third, I will explore whether there is any structural change in the relative importance of country-level shocks versus sector-level shocks.
Fourth, I will assess the role of various policy interventions in stabilizing the national macroeconomic volatility.