nep-ifn New Economics Papers
on International Finance
Issue of 2013‒11‒22
five papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Global sourcing and firm selection By Kohler, Wilhelm; Smolka, Marcel
  2. Foreign Acquisitions and Firm-Level Financial Risk By Georgios Efthyvoulou; Liza Jabbour
  3. Currency Wars in Action: How Foreign Exchange Interventions Work in an Emerging Economy By Moura, Marcelo L.; Pereira, Fatima R.; Attuy, Guilherme de Moraes
  4. Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy By Cosar, A. Kerem; Guner, Nezih; Tybout, James
  5. Capital Account Openness and the Losses from Financial Frictions By Minsoo Han

  1. By: Kohler, Wilhelm; Smolka, Marcel
    Abstract: Which firms find it optimal to integrate their input suppliers into the firm boundaries of control (vertical integration)? Which firms choose to expand their sourcing activities across the national border (offshoring)? This letter provides novel evidence on these questions based on a Spanish firm-level data set. We find that firms selecting into strategies of vertical integration and of offshoring tend to have been more productive ex ante than firms choosing not to do so. This finding is in line with the recent heterogeneous-firm literature on input sourcing under incomplete contracts. --
    Keywords: vertical integration,offshoring,firm selection,firm productivity
    JEL: F14 F23 L22 L23
    Date: 2013
  2. By: Georgios Efthyvoulou; Liza Jabbour
    Abstract: This paper examines the impact of foreign and domestic acquisitions on firm-level financial risk in Italy and Spain over the period 2002-2010. Our results indicate that foreign acquisition leads to a significant and steady reduction in financial risk. In contrast, the domestic acquisition effects are smaller and statistically less robust.
    Keywords: financial risk; acquisitions; foreign investment
    Date: 2013
  3. By: Moura, Marcelo L.; Pereira, Fatima R.; Attuy, Guilherme de Moraes
    Date: 2013–10
  4. By: Cosar, A. Kerem (University of Chicago Booth School of Business); Guner, Nezih (MOVE, Barcelona); Tybout, James (Pennsylvania State University)
    Abstract: This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.
    Keywords: international trade, firm dynamics, size distribution, labor market frictions, inequality
    JEL: F12 F16 E24 J64 L11
    Date: 2013–11
  5. By: Minsoo Han (Pennsylvania State University)
    Abstract: The goal of this paper is to isolate the role of openness to international financial markets (capital account openness) on the total factor productivity (TFP) effect of financial frictions. To do so, I formulate a model in which individual households are either workers or entrepreneurs, can only save in the form of capital, and entrepreneurs are subject to a collateral constraint. Using this structure, I compare two steady states of a calibrated model numerically: one in which the capital rental rate must clear a domestic capital rental market (closed economy), and one in which that rate is given by the world (small open economy). The model predicts that a small open economy is affected less by financial frictions than a closed economy: for the tightest collateral constraint, TFP in a small open economy is only about 1% lower than in the economy without a collateral constraint, while it is 15% lower in a closed economy. TFP losses in a small open economy reflect factor misallocation among incumbent entrepreneurs (intensive margin), not distortions along entry-exit margin, whereas for a tight financial frictions, there are distortions on both intensive and entry-exit margins in a closed economy. Using macro data, I find that a 1% rise in openness is associated with 0.196% decline in the effect of financial frictions on TFP. Running the same regression on subsamples, I also find that this empirical result mainly comes from a group of low income countries.
    Date: 2013

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