http://repub.eur.nl/res/concept/jel-F36/ Recent publications classified by JEL Code F36 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/39842/ 2013-04-11T00:00:00Z We quantify the causal effect of foreign investment on total factor productivity (TFP) using a new global firm-level database. Our identification strategy relies on exploiting the difference in the amount of foreign investment by financial and industrial investors and simultaneously controlling for unobservable firm and country-sector-year factors. Using our well identified firm level estimates for the direct effect of foreign ownership on acquired firms and for the spillover effects on domestic firms, we calculate the aggregate impact of foreign investment on country-level productivity growth and find it to be very small. Fons-Rosen, C. Kalemli-Ozcan, S. Sorensen, B.E. Villegas-Sanchez, C. http://repub.eur.nl/res/pub/32458/ 2011-04-13T00:00:00Z We identify the benefits and costs of financial openness in terms of currency crises based on a novel quantification of the systemic impact of currency (financial) crises. We find that systemic currency crises mainly exist regionally, and that financial openness helps diminish the probability of a currency crisis after controlling for their systemic impact. To clarify further the effect of financial openness, we decompose it into the various types of capital inflows. We find that the reduction of the probability of a currency crisis depends on the type of capital and on the region. Finally yet importantly, we find that monetary policy geared towards price stability, through a flexible inflation target that takes into account systemic impact, reduces the probability of a currency crisis. Garita, G.A. Zhou, C. http://repub.eur.nl/res/pub/22342/ 2011-01-01T00:00:00Z Using long time series for sovereign bond markets of fifteen industrialized economies from 1875 to 2009, I find that financial market integration by the end of the 20th century was higher than in earlier periods and exhibited a J-shaped trend with a trough in the 1920s. The main reason for the higher financial integration seen today is the recent extensive globalization. Around the turn of the 20th century, countries frequently drifted apart. Conversely, in recent years, the bond markets of most countries have moved together. Both policy variables and the global market environment play a role in explaining the time variation in integration, while 'unexplained' changes in the overall level of country risk are also empirically important. My methodology, based on principal components analysis, is immune to outliers and accounts for global and country-specific shocks and, hence, can capture trends in financial integration more accurately than standard techniques such as simple correlations. Volosovych, V. http://repub.eur.nl/res/pub/18032/ 2010-02-08T00:00:00Z In this paper we use a structural VAR model with block exogeneity to investigate if external shocks originating from the USA played a dominant role in influencing the macroeconomic fluctuations in East Asia during the period 1978-2007. The empirical results show a dynamic effect of external shocks, implying that, even though regional integration appears to be deepening and accelerating, especially after the recent global financial crisis, the influence of US shocks on real output fluctuations in the East Asian region is still very strong. The effects of Chinese shocks show an increasing trend over time, but the impacts are still small and not comparable with those of US shocks. The world oil price shock has become increasingly important in influencing the stability of real output growth in the region. The results from variance decomposition and impulse response analysis confirm the findings. Even though Japanese firms have established production networks in East Asia through trade and investment, and China has also grown rapidly and become a key regional country, the results suggest that US influence in the region is still asymmetric and strong. Therefore, it is difficult to conclude that shocks to the East Asian economies have become more regionally oriented. Sato, K. Zhang, Z. McAleer, M.J. http://repub.eur.nl/res/pub/12980/ 2008-05-01T00:00:00Z Most FDI takes place between the developed countries, which suggests that the market-seeking motive is important for understanding FDI. However, given the stylized fact that trade barriers (e.g. transportation costs and financial barriers) have declined over the past 20 years, models that aim to explain market-seeking FDI tend to predict a decline in FDI. Neary (2008) offers two explanations for this puzzle: (1) the export platform motive (where firms gain access to an integrated market by investing in one of the “integrated” countries); (2) Neary’s (2007) GOLE model, which explains cross-border mergers and acquisitions (this model is of interest since most FDI comes in the form of M&As). By using a gravity framework, where we also deal with the “zero gravity problem”, we confirm the predictions of the GOLE model. Brakman, S. Garita, G.A. Garretsen, J.H. Marrewijk, J.G.M. van http://repub.eur.nl/res/pub/32186/ 2008-04-01T00:00:00Z Most FDI takes place between the developed countries, which suggests that the market-seeking motive is important for understanding FDI. However, given the stylized fact that trade barriers (e.g. transportation costs and financial barriers) have declined over the past 20 years, models that aim to explain market-seeking FDI tend to predict a decline in FDI. Neary (2008) offers two explanations for this puzzle: (1) the export platform motive (where firms gain access to an integrated market by investing in one of the “integrated” countries); (2) Neary’s (2007) GOLE model, which explains cross-border mergers and acquisitions (this model is of interest since most FDI comes in the form of M&As). By using a gravity framework, where we also deal with the “zero gravity problem”, we confirm the predictions of the GOLE model. Brakman, S. Garita, G.A. Garretsen, J.H. Marrewijk, J.G.M. van http://repub.eur.nl/res/pub/12962/ 2008-03-01T00:00:00Z This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced panel data that combine bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries. The results reveal a complementarity between trade and investment and a relationship between trade and exchange rate volatility that depend on the sign of bilateral trade balances. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5% for Poland and 30% for Hungary. Brouwer, J. Paap, R. Viaene, J.M.A. http://repub.eur.nl/res/pub/10743/ 2007-09-23T00:00:00Z This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the ten countries that obtained EU membership in 2004. Intuitively, the implementation of a single currency for these countries means replacing several fluctuating currencies by a common currency. This gives rise to both “level” and “risk” effects of reduced currency movements on trade and investment. Another factor is the nature of the link between trade and FDI. This is also important not only because cross-border factor flows are becoming increasingly important, but also the international trade literature has long recognized that cross-border factor flows and trade in goods and services can be substitutes or complements. Given this background, one-way and two-way error component gravity models are estimated to examine for these theoretical expectations within a dataset of unbalanced panel data that combines bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries (including the 10 new EU members). The data generally cover the period from 1990 to 2004. Our empirical results convincingly support: (i) a complementarity between trade and investment, (ii) a relationship between trade and exchange rate volatility that depends on the sign of bilateral trade balances, (iii) a positive effect of EU on trade and investment, and (iv) a positive effect of EMU on foreign investment. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5 percent for Poland and 30 percent for Hungary. Paap, R. Viaene, J.M.A. Brouwer, J. http://repub.eur.nl/res/pub/6626/ 2005-06-06T00:00:00Z The euro area has faced a high number of monetary and policy changes in the recent past as a consequence of the European integration process and, naturally, these developments have important implications for portfolio diversification and asset pricing. Therefore, this paper concentrates on the performance of a specific asset pricing model: the Fama and French threefactor model. Griffin (2002) shows that the Fama and French factors are country specific for the U.S., the U.K, Canada, and Japan. We apply the same methodology to the euro area countries and find that even in this very integrated area the domestic three-factor model outperforms the euro area three-factor model. However, the relative performance of the euro area wide model is increasing, especially for countries with a high number of listed stocks. This could be interpreted as evidence of a higher level of equity market integration caused by lower investment barriers and a changing point of view of institutional investors. Furthermore, we extend the methodology and also test an industry-specific three-factor model. Our findings suggest that lower pricing can be acquired using an industry-specific model relative to the euro area three-factor model. Moerman, G.A. http://repub.eur.nl/res/pub/6583/ 2005-04-01T00:00:00Z This paper documents the existence of large structural breaks in the unconditional correlations among the British pound, Norwegian krone, Swedish krona, Swiss franc, and euro exchange rates (against the US dollar) during the period 1994-2003. Using the framework of dynamic conditional correlation (DCC) models, we find that such breaks occurred both at the time the formal decision to proceed with the euro was made in December 1996 and at the time of the actual introduction of the euro in January 1999. In particular, we document that most correlations were substantially lower during the intermittent period. We also find breaks in unconditional volatilities at the same points in time, but these are of a much smaller magnitude comparatively. Dijk, D.J.C. van Munandar, M.I.S.H. Hafner, C.M.