nep-opm New Economics Papers
on Open Economy Macroeconomics
Issue of 2018‒06‒11
three papers chosen by
Martin Berka
University of Auckland

  1. Multinational Firms and the International Transmission of Crises: The Real Economy Channel By Bena, Jan; Dinc, Serdar; Erel, Isil
  2. Exploring Brexit with dynamic spatial panel models : some possible outcomes for employment across the EU regions By Fingleton, Bernard
  3. Foreign Effects of Higher U.S. Interest Rates By Matteo Iacoviello; Gaston Navarro

  1. By: Bena, Jan (University of British Columbia); Dinc, Serdar (Rutgers University); Erel, Isil (Ohio State University)
    Abstract: We study how multinational companies transmit negative shocks from their subsidiaries located in crisis countries to subsidiaries in non-crisis countries. We find that investment is 18% lower in non-crisis subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a crisis country. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in countries of the affected subsidiaries.
    JEL: F23 F42 G01 G30 G31
    Date: 2017–03
  2. By: Fingleton, Bernard
    Abstract: Starting with a reduced form derived from standard urban economics theory, this paper estimates the possible job-shortfall across UK and EU regions using a time-space dynamic panel data model with a Spatial Moving Average Random Effects (SMA-RE) structure of the disturbances. The paper provides a logical rational for the presence of spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a dynamic spatial Generalized Moments (GM) estimator proposed by Baltagi, Fingleton and Pirotte (2018). Given state-of-the art interregional trade estimates, the simulations are based on a linear predictor which utilizes different regional interdependency matrices according to assumptions about interregional trade post-Brexit.
    Keywords: Brexit; Interregional trade; Urban economics theory; Panel data; Spatial lag; Spatio-temporal lag; Dynamic; Spatial moving average; Prediction; Simulation.
    JEL: C23 C33 C53 E27 F10 J21 R12
    Date: 2018–05–06
  3. By: Matteo Iacoviello; Gaston Navarro
    Abstract: This paper analyzes the spillovers of higher U.S. interest rates on economic activity in a large panel of 50 advanced and emerging economies. We allow the response of GDP in each country to vary according to its exchange rate regime, trade openness, and a vulnerability index that includes current account, foreign reserves, inflation, and external debt. We document large heterogeneity in the response of advanced and emerging economies to U.S. interest rate surprises. In response to a U.S. monetary tightening, GDP in foreign economies drops about as much as it does in the United States, with a larger decline in emerging economies than in advanced economies. In advanced economies, trade openness with the United States and the exchange rate regime account for a large portion of the contraction in activity. In emerging economies, the responses do not depend on the exchange rate regime or trade openness, but are larger when vulnerability is high.
    Keywords: U.S. Monetary Policy ; Foreign Spillovers ; Local Projection ; Macroeconomic Transmission ; Panel Data
    JEL: F4 E5 C3
    Date: 2018–05

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