A Study On International Vertical Specialization、Intermidiate Trade And Business Co-Movement

Business co-movement has been one of the major proposition of economics. Despite the academic consensus on economic fluctuations caused by exogenous shocks, the impact at the core of the study of economic fluctuations. However, understanding the importance of the various shocks and an analysis of the impact of different sources and mechanisms are different.After the 1990s, with the decline in production technology development and trade costs, international vertical specialization has become the main form of international specialization. Every country turns traditional industrial specialization to product specialization. Transnational corporations put its resources as a global organization of production, gradually keeping the domestic and international market internalization, and the form of international trade has undergone profound changes, by the trade object from the final product to intermediate product. From the global economic reality, the close relationship of this type has a deep effect on every country’s business co-movement. Through product value chain in different countries,any large external shocks will result in business co-movement.This paper discusses the impact of the international vertical specialization by intermediate goods trade on business co-movement. In the theoretical analysis, this paper analyzes the intermediate goods trade transmit mechanism of business co-movement, based on international vertical specialization. Based on Costas, Ananth (2009), this paper constructs a two-country dynamic general equilibrium model for analyzing the impact of the international vertical specialization by intermediate good trade on business co-movement. In the empirical analysis, this paper uses business co-movement HP filter processing method,and selects 1999-2013 panel data of China, Japan, South Korea, the United States and EU7 these 11 trade countries, analyzing countries’ business co-movement under the international vertical specialization. Further, considering the special status of China in the international vertical specialization, this paper empirically analyzes the impact of the major trading partners on China’s business co-movement.The empirical results show that:bilateral business co-movement and bilateral vertical specialization, intensity of bilateral trade, bilateral industrial structure similarity have a positive correlation, but and the intensity of bilateral direct investment and bilateral trade intensity have a negative correlation. Bilateral vertical specialization is the primary factor in bilateral business co-movement impact. Taking China as the object of the study, this paper finds that bilateral vertical specialization and bilateral business co-movement have a significant positive relationship; compared to bilateral intra-industry trade intensity, the impact of trade intensity on bilateral business co-movement is more significant and important. The main channel of the major trading partners impacting on business co-movement is the trade channel.Based on theoretical analysis and empirical research, this paper further puts forward related suggestions about the stability of Chinese economy under the international vertical specialization.