The Impact of Global Value Chains on Business Cycles: A Comparative Analysis of G7 and D8 Countries

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Karagöl V., Benli A., Şahin A.

Journal of Applied and Theoretical Social Sciences, vol.8, no.3, pp.482-509, 2026 (TRDizin)

Abstract

Introduction: This study investigates the effects of global value chain (GVC) participation on domestic business cycles in developed (G7) and developing (six selected D8) countries. Understanding this relationship is crucial, as increasing global integration may generate asymmetric macroeconomic outcomes across country groups.

Method: The analysis employs panel data covering the period 1995–2022. Business cycles are represented by the cyclical component of real GDP obtained through filtering techniques. GVC participation is examined alongside fixed capital formation and labor productivity. The empirical analysis is conducted using the Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) approach, which accounts for cross-sectional dependence and heterogeneity.

Results or Findings: The results indicate that fixed capital formation and labor productivity are positively and significantly associated with cyclical economic activity in both country groups. However, the relationship with GVC participation differs markedly: while GVC participation exhibits a positive co-movement with expansionary phases in G7 countries, it is negatively associated with cyclical momentum in the six selected D8 countries.

Discussion or Conclusion: These findings suggest that the macroeconomic effects of GVC integration are heterogeneous, depending on countries’ positions within value chains and their modes of integration. The results highlight the importance of upgrading within GVCs for developing countries. Future research may explore sectoral dynamics and the role of institutional factors in shaping these outcomes.