Heterogeneous Country Responses to the Great Recession: The Role of Supply Chains

The one time shock of the Great Recession in 2008/9 opens up the opportunity to study the sensitivity of countries to global economic shocks. Some countries are more resilient to global shocks than others. The authors analyze the link between the country response to the Great Recession and participation in global supply chains. Their preferred measure of supply chains is the Grubel–Lloyd index, which enables us to use detailed trade data over longer periods of time. The main finding is that strong involvement in global supply chains slows down the recovery of countries to recessions. Europe, which is heavily involved in global supply chains, is a case in point.