In this paper, we estimate the effect of global supply chain shock on firm’s investment decision using 1,252 firm-level data from 2001 to 2021. After building firm’s investment function with global supply chain pressure index(GSCPI) from Federal R...
In this paper, we estimate the effect of global supply chain shock on firm’s investment decision using 1,252 firm-level data from 2001 to 2021. After building firm’s investment function with global supply chain pressure index(GSCPI) from Federal Reserve Bank of New York, we estimate it using a dynamic panel GMM method by Arellano and Bond(1991). Our result shows that there exists an invested U Shape of non-linear relationship between GSCPI and firm’s investment decision, which implies that GSCPI gives a negative effect on firm’s decision only after some threshold level. Also, we find that this relationship is strongly hold for export oriented firms. Our results suggest that government policy support would be needed in time what the degree of global supply chain shock is severely worse, and the establishment of monitoring system for global supply chain by industry should be needed.