Stability of Production Networks in East Asia: Duration and Survival of Trade

This paper sheds light on the stability of international production networks in East Asia from the perspective of the duration and survival of bilateral trade relationships at the product-line level. Using highly disaggregated data for intra-East Asian machinery trade, survival analysis is conducted as well as the examinations of the duration and volatility of trade relationships. The product-level analyses reveal that machinery parts and components are traded through more stable and longer-lived relationships among East Asian countries, compared to final products. Once transactions are started, trade relationships of machinery parts and components are more likely to be maintained between countries even at a long distance, regardless of the exchange-rate fluctuations. Trade relationships of machinery final products, on the other hand, are more likely to be sensitive to the level of trading cost as well as the exchange-rate fluctuations.