Resiliency of Production Networks in Asia: Evidence from the Asian Crisis

Abstract

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This paper presents the resiliency of international production networks stretched across the Asian region in face of the Asian financial and currency crisis back in 1997-98, as well as confirming its stability with consideration to adverse effects of the crisis. To examine the probability of survival once a trade relationship is established and the probability of revival after the transaction is broken off, survival analysis is conducted using the country-product level trade data. A series of survival analyses provide evidence supporting the view that transactions of intermediate goods within production networks are more likely to be stable and resilient to a temporary disruption compared to other transactions. First, even after considering the impact of the Asian crisis, machinery parts & components are more likely to be traded through long-lived trade relationships compared to finished products in intra-Asian trade. Second, machinery parts & components are no exception in that a non negligible portion of trade relationships was actually broken off amid the Asian crisis, but many of them were restored shortly afterward as compared to the others.

ERIA-DP-2009-21.pdf