Global Production Linkages and Stock Market Comovement
CESifo, Munich, 2023
CESifo Working Paper No. 10492
![](https://cesifo.org/DocImg/cesifo1_wp10492.jpg?c=1689236996)
Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in international trade – in particular global value chains – and equity market comovement. These results suggest that supply chain disruptions and reshoring, for instance due to political tensions, war, and the COVID-19 crisis, might affect the interconnections between stock markets via rippling through the global production network.
Monetary Policy and International Finance
Trade Policy