Publication Date: April, 2024

JCI-WP-2024-02 Does Economic Policy Uncertainty Impact Firm GVC Participation? Microdata Evidence from India

In this study, using detailed firm-level data, we examine the implications of economic policy uncertainty on GVC integration of Indian manufacturing firms. Using panel-data from 2004-2021, we find that economic policy uncertainty (EPU) impedes GVC participation of the firm. Further, we find that the impact of EPU on GVC participation operates via the financial constraint channel with higher leveraged and low liquidity firms. Using survival analysis we also highlight that higher EPU results in higher exit from GVCs, and lower entry into GVCs.


Jeffrey Cheah Institute on Southeast Asia
Head-Jeffrey Cheah Institute on Southeast Asia, Senior Fellow-Jeffrey Sachs Center on Sustainable Development

  Ketan Reddy

Indian Institute of Technology

  Subash Sasidharan

Indian Institute of Technology

The JCI Working Paper series is published to disseminate preliminary research findings and stimulate intellectual discourse on wide-ranging public policy issues, ranging from security to sustainability. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the Jeffrey Cheah Institute on Southeast Asia.