Risk Sharing and Shock Propagation in Global Value Chains: A Structural Stress Test in a Multilayer Trade Finance Network

Global value chains can diversify risk, but they can also transmit production disruptions and financial losses across interconnected economies. This study examines whether trade–finance coupling amplifies systemic loss relative to a trade-only benchmark, how diversification-based risk sharing offsets that amplification, and whether multilayer structure changes systemic rankings. We develop a transparent multilayer stress-testing framework linking trade–value–chain dependence, reconstructed foreign currency portfolio exposures, and cross-layer shock transmission for 20 country-sector nodes. The trade layer is based on 2014 WIOD data, while 2023 CPIS foreign currency asset margins are allocated using relative entropy; 5000 common and idiosyncratic shock simulations are evaluated across alternative propagation and absorption regimes. Mean output-weighted loss increases from 1.009% under trade-only propagation to 1.379% in the baseline multiplex model, while the 95th percentile rises from 5.092% to 6.217%. Eliminating diversification-based absorption raises mean loss to 1.541%, whereas stronger absorption lowers it to 1.251%. Robustness checks using alternative financial scaling and a 12-node aggregation preserve the main qualitative result. These calibrated stress-test outcomes, rather than causal or historical estimates, show that the balance between risk sharing and contagion is benchmark- and state-dependent.