Essays On Multinational Firms Financial Frictions And Income In Developing Countries
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Essays On Multinational Firms Financial Frictions And Income In Developing Countries
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Author : Yunfan Gu
language : en
Publisher:
Release Date : 2018
Essays On Multinational Firms Financial Frictions And Income In Developing Countries written by Yunfan Gu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The dissertation contributes to our understanding of how multinational firms and financial frictions affect income in developing countries. From a policy perspective, I find that as developing countries open up to multinational firms, financial reforms become increasingly beneficial to national income in the countries. I also find that the joint ventures of foreign multinational firms with state-owned firms, an industrial policy in China, prevent technology spillovers and suppress industrial output. The dissertation consists of three chapters. Chapter 1: Financial frictions, Multinational Firms, and Income in Developing Countries: Theoretical Analysis Financial frictions create resource misallocation across heterogeneous production units and reduce national income (GNP) in developing countries. Multinational firms, however, can largely circumvent local financial frictions by borrowing from international sources. In this chapter, I theoretically study whether the presence of multinational firms in developing countries alleviates the adverse impact of financial frictions on national income. I show that in a developing economy that is open to multinational firms, if domestic firms produce a sufficiently large (small) share of output, financial frictions will cause a larger (smaller) decline in national income than in an otherwise identical developing economy that is closed to multinational firms. Such result calls for the quantitative analysis in the next chapter. Chapter 2: Financial frictions, Multinational Firms, and Income in Developing Countries: Quantitative Analysis In this chapter, I quantitatively study how the presence of multinational firms in developing countries change the adverse impact of financial frictions on national income. Using a calibrated structural model, I find that when a developing economy is open to multinational firms, a modest financial reform that reduces financial frictions in the developing economy will increase national income by 19%, as opposed to only 11% when the economy is closed to multinational firms. Such result indicates that financial frictions become increasingly costly and financial reforms become increasingly beneficial to national income in developing countries as they open up to multinational production. Chapter 3, Joint Ventures and Technology Spillovers in China Chinese government actively promotes joint ventures of foreign multinational firms with state-owned firms. In this chapter, I study the effects of the joint ventures in promoting technology spillovers. Using firm-level data in China, I find that higher joint venture presence in a sector leads to higher productivity of firms in the upstream of that sector, but lower productivity of firms in the downstream of that sector. A quantitative analysis suggests that the later force will dominate, and joint ventures will on aggregate prevent technology spillovers and cause a significant decline in total industrial output in China.
Essays On International Trade Capital Flows And Financial Frictions
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Author : Maria Margarita Lopez Forero
language : en
Publisher:
Release Date : 2016
Essays On International Trade Capital Flows And Financial Frictions written by Maria Margarita Lopez Forero and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Two particular concerns in international economics motivate this research: I. How are real and financial activities related to each other in a globalized economy? II. What role do financial frictions play in this relationship ? Three essays look at these questions from different perspectives. The first chapter, in collaboration with Jean-Charles Bricongne and SebastianFranco-Bedoya, revises the old question on the relation between FDI and exports on French firms, where theory seems to be at odds with empirical findings. Most FDI and most trade take place between rich markets, where the horizontal investment type is expected to happen. In this sense, empirical studies have almost invariably found a complementarity relation while standard Horizontal FDI models predict substitutability between FDI and exports given the proximity-concentration trade-off. [...]The second chapter empirically examines how external financial needs measured at the sector level- and financial development at the country level interact to shape the aggregate marginal product of capital of a country (MPK) and its foreign direct investment inflows (FDI). First, using new available data we construct annual aggregate MPK for 50 developing and developed countries during 1995-2008; we use industry-level data to construct an annual country-level measure of external financial dependence and assess its effects on MPK conditional on the level of financial development. Our findings imply that financial development seems to be a necessary condition -and certainly not a sufficient one- in order for production in financially dependent sectors to positively affect aggregate MPK in developing countries. Second, using bilateral FDI inflows in developing countries between 2001 and 2010, we analyze how external financial dependence and financial development determine FDI in flows in developing countries. [...]The third chapter, joint research with Jean-Charles Bricongne and Fabrizio Coricelli, studies the transmission of global shocks during the Great Recession and its impact on French employment. Particularly, we explore the role of trade credit in the propagation of cross-border shocks. Using a sub-sample of importing enterprises that were active over 2004-2009,our findings imply that strong pre-crisis sourcing ties with countries that were more resilient to the global crisis, translated into better performance in terms of employment growth over 2008-2009. This effect dramatically varies with trade credit intensity. Strongly relying on trade credit made firms more vulnerable to unanticipated shocks, for which the adverse impact of the crisis was exacerbated. This effect intensified among firms with important sourcing ties with severely shocked countries. While the negative effect of the crisis was mitigated when sourcing relations with countries subject to milder shocks were stronger. Supporting, therefore, the hypothesis that trade credit was an alternative source of financing for enterprises during the crisis, where implicitly borrowing from suppliers helped importers overcoming financial constraints. Our contribution to the literature adds to the debate on the role of trade finance in explaining the real economic downturn across borders.
Managing Global Money
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Author : Graham Bird
language : en
Publisher: MacMillan
Release Date : 1988
Managing Global Money written by Graham Bird and has been published by MacMillan this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Business & Economics categories.
This collection of articles and papers has been organised under a limited number of specific themes in international financial economics, including balance of payment theory and policy, the activities of the IMF, Special Drawing Rights, the role of the private financial markets, and the international economic order. A unifying theme running through all the essays is that some degree of management of international financial affairs is desirable. The book has a strong policy orientation and should be of interest to students and practitioners of international financial economics alike.
Essays On Financial Markets Inequality And Economic Development
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Author : Joaquin Blaum
language : en
Publisher:
Release Date : 2012
Essays On Financial Markets Inequality And Economic Development written by Joaquin Blaum and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
In Chapter 1, I study the effects of wealth inequality on economies where financial markets are imperfect. I exploit the idea that inequality should have a different effect across sectors. Using a difference-in-difference strategy, I show that sectors that are more in need of external finance are relatively smaller in countries with higher income inequality. I then build a model in which sectors differ in their fixed cost requirement, agents face collateral constraints, and production is subject to decreasing returns. A calibrated version of the model is consistent with the documented facts on inequality and cross-sector outcomes. At the calibrated parameters, wealth inequality exacerbates the effect of financial frictions on the economy. Quantitatively, wealth inequality can generate losses of up to 46 percent of per capita income. In Chapter 2, co-authored with Claire Lelarge and Michael Peters, we explore the ingredients that a model of import behavior should have in order to be consistent with the firm level evidence. We build a model where firms are heterogeneous in their factor neutral productivity, and prices, fixed costs and input qualities are common across firms. Using a comprehensive dataset of French firms, we test the qualitative predictions of such model. The model fares well in describing firm's expenditure across imported varieties, but fails to account for the pattern of expenditure between domestic and foreign inputs. We conclude that a mechanism inducing firm-level heterogeneity in the relative price of domestic varieties is needed to model import demand. In Chapter 3, I study the effects of financial frictions on the pattern of cross-industry growth rates. I document two facts: (i) externally dependent sectors tend to grow faster along the economy's development path, and (ii) externally dependent sectors grow disproportionately faster in countries with better financial institutions. I argue that financial frictions can account for these facts. I build a dynamic two-sector model in which sectors differ in their liquidity requirement and agents face collateral constraints. Financial frictions generate faster growth in the sector with higher liquidity requirement. I identify conditions under which financial development leads to higher excess growth in the externally dependent sector.
Making It Big
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Author : Andrea Ciani
language : en
Publisher: World Bank Publications
Release Date : 2020-10-08
Making It Big written by Andrea Ciani and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-10-08 with Business & Economics categories.
Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development. It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their value chains. The challenge for economic development, however, is that production does not reach economic scale in low- and middle-income countries. Why are large firms scarcer in developing countries? Drawing on a rare set of data from public and private sources, as well as proprietary data from the International Finance Corporation and case studies, this book shows that large firms are often born large—or with the attributes of largeness. In other words, what is distinct about them is often in place from day one of their operations. To fill the “missing top†? of the firm-size distribution with additional large firms, governments should support the creation of such firms by opening markets to greater competition. In low-income countries, this objective can be achieved through simple policy reorientation, such as breaking oligopolies, removing unnecessary restrictions to international trade and investment, and establishing strong rules to prevent the abuse of market power. Governments should also strive to ensure that private actors have the skills, technology, intelligence, infrastructure, and finance they need to create large ventures. Additionally, they should actively work to spread the benefits from production at scale across the largest possible number of market participants. This book seeks to bring frontier thinking and evidence on the role and origins of large firms to a wide range of readers, including academics, development practitioners and policy makers.
Essays On Multinational Financial Managment
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Author : Jing Jin
language : en
Publisher:
Release Date : 2016
Essays On Multinational Financial Managment written by Jing Jin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with International business enterprises categories.
My dissertation comprises of two essays: 1) Difference in responses to currency crisis between multinational firms and local firms: the use of foreign currency debt and 2) the impact of internal capital markets on the cash holdings of subsidiaries of multinational corporations. The first essay looks at the differential responses to currency crisis between multinational affiliates and local firms when both have exposure to foreign currency debt. Previous papers (Desai, Foley and Forbes, 2008) have found that U.S. multinational affiliates use their internal capital markets to capitalize on the benefits of large currency depreciation and increase sales and investment significantly more than local firms. We trace this differential response to the use of foreign currency debt. We find that local firms without foreign currency debt are less affected by currency depreciation. In addition, multinational affiliates whose parent firms are also affected by currency crisis in their home country decreases sales and assets more. The second essay examines the impact of internal capital markets on the cash holdings of emerging market subsidiaries of multinational corporations. We examine a panel of 489 multinational firms (with 2208 subsidiaries) and 749 local firms across seven countries from 2004 to 2013 and find that emerging market subsidiaries of multinational firms tend to hold significantly less cash than their emerging market competitors (local firms). This finding is suggestive of the existence of a favorable internal capital market for these subsidiaries. In addition, we examine the impact of the 2009-2010 sovereign debt crisis on cash holdings and find that, after the crisis, firms hold less cash in general and the difference in cash holdings between subsidiaries and their local counterparts decreases. Lastly, we find that the domicile of the parent company matters. When the parent is located in developed countries, there seems to be an effective internal capital market, and the multinational affiliates tend to hold less cash than the local competitors. In contrast, when the parent firms are located in developing countries, the multinational affiliates seem to derive little benefit from the internal capital market, and there is no significant difference in cash holdings.
Essays On Financial Frictions And Heterogeneous Firms In International Economics
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Author : Ruanjai Suwantaradon
language : en
Publisher:
Release Date : 2008
Essays On Financial Frictions And Heterogeneous Firms In International Economics written by Ruanjai Suwantaradon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Essays On International Trade And Financial Developmen T
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Author : Faezeh Raei
language : en
Publisher:
Release Date : 2011
Essays On International Trade And Financial Developmen T written by Faezeh Raei and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
The first chapter studies the effects of financial obstacles to productivity improvement in the context of trade reforms, by constructing a dynamic heterogeneous firms model with financial frictions. Trade reforms are considered beneficial because they confront the liberalized country's firms with more competition from abroad and increase their incentives to become more efficient. This implies that if poor countries do not improve their productivities they might lose the intended gains from liberalization. Financial frictions however have been quoted an important obstacle for firms to improve their productivities. To address these issues, first, using data on 15 trade liberalization episodes, I document that more financially developed countries experienced more productivity growth after their trade liberalization. Second, I construct a dynamic heterogeneous firms model with financial frictions in financing costs for productivity improvement. Calibrated numerical exercises show that if a country does not improve its financial intermediaries at the outset of trade liberalization it may lose as much as %40 of potential output gains and productivity improvements. The result has policy implications regarding the simultaneous reforms in trade and financial intermediaries. The second chapter is a cross country empirical analysis aiming to provide evidence for the effects of trade openness and financial development on firms decision to upgrade their technology and the impact on the distribution of firm size across countries. The idea is that reduction of trade barriers is likely to affect incentives of bigger firms to grow to export markets as well as incentives of smaller firms to innovate due to increased competition. Financial frictions, however are likely to limit the scope of these decisions and more so for smaller firms and capital intensive industries. This is likely to have heterogeneous effects on firms leading to changes in firm size distribution. I hypothesize that a combination of trade openness and low financial development increases the relative size of big to smaller firms. To test this hypothesis, I take advantage of cross country/industry differences in trade protection and financial development/needs to provide enough variation for identifying these effects. Using establishment level data from OECD countries, I provide evidence for this hypothesis, by performing double difference estimations. In addition using firm level data on 20,000 firms from World Bank's enterprise survey, I provide more evidence that trade openness promotes productivity growth particularly for bigger firms in less financially developed countries. The finding contributes to the literature on importance of finance for firm growth by focusing on the channel of heightened competition due to trade. It highlights the importance of incorporating financial aspects of a country in trade analysis. The third chapter is an exercise exploring the welfare gains of trade in a North-South trade where counties are asymmetric in their ability to produce more sophisticated goods. The exercise is based on the model by Matsuyama (JPE 2000), where the world is a static Ricardian model with a continuum of goods and unit demand non-homothetic preferences. One country (the south) has comparative advantage in production of goods with lower income elasticity of demand. As a result, over time with uniform global improvement in technology in the form of smaller unit labor requirements, the terms of trade moves against south. The numerical exercise, calibrates stochastic interpretation of the model to for a specific choice of countries and provides evidence that over time, if the patterns of specializations are not changed drastically, the country specialized in production of less sophisticated goods disproportionately grows less than the other one and has the terms of trade moving against it.
Global Waves Of Debt
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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-03
Global Waves Of Debt written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-03 with Business & Economics categories.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Globalization And Poverty
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Author : Ann Harrison
language : en
Publisher: University of Chicago Press
Release Date : 2007-11-01
Globalization And Poverty written by Ann Harrison and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-11-01 with Business & Economics categories.
Over the past two decades, the percentage of the world’s population living on less than a dollar a day has been cut in half. How much of that improvement is because of—or in spite of—globalization? While anti-globalization activists mount loud critiques and the media report breathlessly on globalization’s perils and promises, economists have largely remained silent, in part because of an entrenched institutional divide between those who study poverty and those who study trade and finance. Globalization and Poverty bridges that gap, bringing together experts on both international trade and poverty to provide a detailed view of the effects of globalization on the poor in developing nations, answering such questions as: Do lower import tariffs improve the lives of the poor? Has increased financial integration led to more or less poverty? How have the poor fared during various currency crises? Does food aid hurt or help the poor? Poverty, the contributors show here, has been used as a popular and convenient catchphrase by parties on both sides of the globalization debate to further their respective arguments. Globalization and Poverty provides the more nuanced understanding necessary to move that debate beyond the slogans.