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Open AccessArticle

Fragmentation of International Production and Business Cycle Synchronization: New Evidence pre and during Global Financial Crises

Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, National University of Malaysia (UKM), Bangi 43600, Selangor, Malaysia
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Academic Editor: Jungho Baek
Sustainability 2021, 13(8), 4131; https://doi.org/10.3390/su13084131
Received: 15 February 2021 / Revised: 12 March 2021 / Accepted: 15 March 2021 / Published: 8 April 2021
(This article belongs to the Section Economic and Business Aspects of Sustainability)
Understanding the link between the fragmentation of international production (FIP) and business cycle synchronization (BCS) is crucial because it affects the world economic stability and hence hampers the sustainability in world trade, world production, and the world supply chain. Following that, this paper investigates the effects of fragmentation in an international production (FIP) on business cycle synchronization (BCS) amongst 38 countries (29 OECD and nine non-OECD countries) for two different periods; pre-crisis (2003–2007) and during the crisis period (2008–2012). This study uses a dynamic panel system GMM estimation in analyzing the effect of FIP on BSC by controlling other explanatory variables, namely, trade linkages and financial openness. Unlike many previous results, the main findings reveal that FIP positively and significantly affects BCS during a crisis period. However, it shows an insignificant effect during the normal period. In other words, FIP would amplify the synchronization of output downfall during the crisis period. Trade linkages have a negative and significant relationship with BCS in both periods, whereas financial openness has a negative and significant relationship with BCS during the normal period. The study suggests that selective measures have to be undertaken in implementing FIP during the crisis period to reduce the negative impact of BCS. Increasing trade and financial activities, on the other hand, would be beneficial for the countries as they would reduce the negative effect of BCS during the crisis period. View Full-Text
Keywords: international trade; fragmentation in international production; synchronization of business cycles; generalized methods of moment (GMM) international trade; fragmentation in international production; synchronization of business cycles; generalized methods of moment (GMM)
MDPI and ACS Style

Khidil, N.; Zaidi, M.A.S.; Abdul Karim, Z. Fragmentation of International Production and Business Cycle Synchronization: New Evidence pre and during Global Financial Crises. Sustainability 2021, 13, 4131. https://doi.org/10.3390/su13084131

AMA Style

Khidil N, Zaidi MAS, Abdul Karim Z. Fragmentation of International Production and Business Cycle Synchronization: New Evidence pre and during Global Financial Crises. Sustainability. 2021; 13(8):4131. https://doi.org/10.3390/su13084131

Chicago/Turabian Style

Khidil, Norrana; Zaidi, Mohd A.S.; Abdul Karim, Zulkefly. 2021. "Fragmentation of International Production and Business Cycle Synchronization: New Evidence pre and during Global Financial Crises" Sustainability 13, no. 8: 4131. https://doi.org/10.3390/su13084131

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