Research On The Conduction Of Intra-product Trade To International Business Cycle

Two new phenomenon on the international economic fundamentals today are worth to be noticed. The first one is that business cycle plays more and more important role in affecting the development of world economy, especially during the subprime mortgage crisis in USA in 2007. It goes against the economic forecast of academic and political researchers again, alerting people to take emphasis on the economic cycle research. The other one is that intra-product trade has become the important characteristics of economic globalization and become the important driving force of world economic development with the deepening of international division of labor. At the same time, it provides a new perspective to the study the business cycle. However, research on introducing intra-product trade to business cycle started since 1990’s, and it is developing slowly. So the present study has certain theory value and practical significance.Three characteristics of trade fluctuation druing economic crisis in recent 20 years are described in the present study. The first one is the effect of crisis on total trade:the effect of sub-prime crisis in the United States on triangle trade pattern and China’s total export trade; The second one is the effect of crisis on industry trade:sub-prime crisis in the United States influenced more on intermediate industry trade than non-intermediate industry trade. Also, the crisis has more impact on export trade especially the export trade of electromechanical products than Asian economic crisis; The third one is "over adjusting" phenomenon:The 2011 Japan earthquake leads to decoupling phenomenon in global supply chain of electronics and automotive industry, in which intra-product specialization is very centralized. The disaster also leads to large fluctuation in trade during U.S. sub loan crisis.The present dissertation develops a global economic model based on intra-products trade pattern of "2×2× 3" (IMT-GEM). The deductive logic of the model is that first get the derivation in IMT-GEM model according to the characteristics of intra-products trade. Then find the steady solution of the model with fixed conditions so that the co-movement of international business cycle is obtained naturally. Then, we set up theoretical model based on the fact that trade is pro-cyclical and is clearer than world business cycle during subprime mortgage crisis in USA. The model shows the transmission mechanism of the conduction of intermediate product loan effect on trade fluctuation, which proved the conduction of intra-product trade on international business cycle. Therefore, six theoretical propositons are given in the present study.The conduction of intra-product trade on international business cycle are proved from 3 perspectives. Firstly, from the total industry perspective, the degree of vertical specialization has a significant positive effect on the international economic cycle by the panel data of China, East Asia and Europ and America. This conclusion is stable to intermediate products. Secondly, from the industry perspective, with the change of the capital/technology intensive and strong flow of the intermediate products trade to the labor/resource intensive intermediate goods trade, then-conduction on international business cycle are weakened by using the panel data of factor density industry of different kinds. It indicates that the level of liquidity is positively correlated with the international economic cycle. Thirdly, from the crisis perspective, estimate the effect of final product demand crisis on intermediate products trade using multinational time series data, and test intermediate product deposit effect conduction mechanism of crisis using export performance panel model. All estimation results support theory prediction.Based on the conclusion of the theoretical analysis and empirical research, the present dissertation puts forward some advices on how to use the conduction of intra-product trade on international business cycle:Firstly, establish the international production network of "vertical horizontal type division of labor", diversify risk of intra product specialization system, and improve the reliability of economic growth. Secondly, pay attention to the cultivation and introduction of the advanced elements to become the dominant of international business cycle.