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Isabelle Mejean - One of the best experts on this subject based on the ideXlab platform.

  • the micro origins of International Business Cycle comovement
    Post-Print, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business-Cycle comovement using data covering the universe of French firm-level value added and International linkages over the period 1993-2007. At the micro level, trade and multinational linkages with a particular foreign country are associated with a significantly higher correlation between a firm and that foreign country. The impact of direct linkages on comovement at the micro level has significant macro implications. Without those linkages the correlation between France and foreign countries would fall by about 0.098, or one-third of the observed average correlation of 0.291 in our sample of partner countries. (JEL F14, F23, F44, F62, L14) Countries that exhibit greater bilateral trade and multinational production linkages have more correlated Business Cycles (Frankel and Rose 1998; Kleinert, Martin, and Toubal 2015). While the empirical literature has repeatedly confirmed the trade-comovement relationship in the data, its meaning is not well understood, either empirically or quantitatively. Taken at face value, the positive association between bilateral trade and multinational linkages and comovement is often interpreted as evidence of transmission of shocks across countries through those linkages. The empirical literature has faced two related challenges. The first is the critique by Imbs (2004) that countries that trade more with each other are similar in other ways, and thus subject to common shocks. Under an extreme version of this view, the trade linkage variable in the Frankel-Rose specification does not reflect the

  • the micro origins of International Business Cycle comovement
    The American Economic Review, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business Cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affiliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because Internationally connected firms are systematically larger than non-Internationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average Business Cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of Business Cycle shocks through direct trade and multinational ownership linkages at the firm level.

  • large firms and International Business Cycle comovement
    The American Economic Review, 2017
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of the top 100 firms in France in aggregate Business Cycle comovement. We establish that the top 100 firms (i) are important in aggregate; (ii) exhibit stronger International linkages than the rest of the economy; and (iii) contribute substantially to aggregate comovement.

Aleksandr Alekseevitsh Levchenko - One of the best experts on this subject based on the ideXlab platform.

  • the micro origins of International Business Cycle comovement
    Post-Print, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business-Cycle comovement using data covering the universe of French firm-level value added and International linkages over the period 1993-2007. At the micro level, trade and multinational linkages with a particular foreign country are associated with a significantly higher correlation between a firm and that foreign country. The impact of direct linkages on comovement at the micro level has significant macro implications. Without those linkages the correlation between France and foreign countries would fall by about 0.098, or one-third of the observed average correlation of 0.291 in our sample of partner countries. (JEL F14, F23, F44, F62, L14) Countries that exhibit greater bilateral trade and multinational production linkages have more correlated Business Cycles (Frankel and Rose 1998; Kleinert, Martin, and Toubal 2015). While the empirical literature has repeatedly confirmed the trade-comovement relationship in the data, its meaning is not well understood, either empirically or quantitatively. Taken at face value, the positive association between bilateral trade and multinational linkages and comovement is often interpreted as evidence of transmission of shocks across countries through those linkages. The empirical literature has faced two related challenges. The first is the critique by Imbs (2004) that countries that trade more with each other are similar in other ways, and thus subject to common shocks. Under an extreme version of this view, the trade linkage variable in the Frankel-Rose specification does not reflect the

  • the micro origins of International Business Cycle comovement
    The American Economic Review, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business Cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affiliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because Internationally connected firms are systematically larger than non-Internationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average Business Cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of Business Cycle shocks through direct trade and multinational ownership linkages at the firm level.

  • large firms and International Business Cycle comovement
    The American Economic Review, 2017
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of the top 100 firms in France in aggregate Business Cycle comovement. We establish that the top 100 firms (i) are important in aggregate; (ii) exhibit stronger International linkages than the rest of the economy; and (iii) contribute substantially to aggregate comovement.

  • multinational firms and International Business Cycle transmission
    Quarterly Journal of Economics, 2017
    Co-Authors: Javier Cravino, Aleksandr Alekseevitsh Levchenko
    Abstract:

    We investigate how multinational firms contribute to the transmission of shocks across countries using a large multicountry firm-level data set that contains cross-border ownership information. We use these data to document two novel empirical patterns. First, foreign affiliate and headquarter sales exhibit strong positive comovement: a 10% growth in the sales of the headquarter is associated with a 2% growth in the sales of the affiliate. Second, shocks to the source country account for a significant fraction of the variation in sales growth at the source-destination level. We propose a parsimonious quantitative model to interpret these findings and to evaluate the role of multinational firms for International Business Cycle transmission. For the typical country, the impact of foreign shocks transmitted by all foreign multinationals combined is non-negligible, accounting for about 10% of aggregate productivity shocks. On the other hand, since bilateral multinational production shares are small, interdependence between most individual country pairs is minimal. Our results do reveal substantial heterogeneity in the strength of this mechanism, with the most integrated countries significantly more affected by foreign shocks.

Julian Di Giovanni - One of the best experts on this subject based on the ideXlab platform.

  • the micro origins of International Business Cycle comovement
    Post-Print, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business-Cycle comovement using data covering the universe of French firm-level value added and International linkages over the period 1993-2007. At the micro level, trade and multinational linkages with a particular foreign country are associated with a significantly higher correlation between a firm and that foreign country. The impact of direct linkages on comovement at the micro level has significant macro implications. Without those linkages the correlation between France and foreign countries would fall by about 0.098, or one-third of the observed average correlation of 0.291 in our sample of partner countries. (JEL F14, F23, F44, F62, L14) Countries that exhibit greater bilateral trade and multinational production linkages have more correlated Business Cycles (Frankel and Rose 1998; Kleinert, Martin, and Toubal 2015). While the empirical literature has repeatedly confirmed the trade-comovement relationship in the data, its meaning is not well understood, either empirically or quantitatively. Taken at face value, the positive association between bilateral trade and multinational linkages and comovement is often interpreted as evidence of transmission of shocks across countries through those linkages. The empirical literature has faced two related challenges. The first is the critique by Imbs (2004) that countries that trade more with each other are similar in other ways, and thus subject to common shocks. Under an extreme version of this view, the trade linkage variable in the Frankel-Rose specification does not reflect the

  • the micro origins of International Business Cycle comovement
    The American Economic Review, 2018
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of individual firms in International Business Cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affiliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because Internationally connected firms are systematically larger than non-Internationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average Business Cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of Business Cycle shocks through direct trade and multinational ownership linkages at the firm level.

  • large firms and International Business Cycle comovement
    The American Economic Review, 2017
    Co-Authors: Julian Di Giovanni, Aleksandr Alekseevitsh Levchenko, Isabelle Mejean
    Abstract:

    This paper investigates the role of the top 100 firms in France in aggregate Business Cycle comovement. We establish that the top 100 firms (i) are important in aggregate; (ii) exhibit stronger International linkages than the rest of the economy; and (iii) contribute substantially to aggregate comovement.

Francesca Viani - One of the best experts on this subject based on the ideXlab platform.

  • the International risk sharing puzzle is at Business Cycle and lower frequency
    Canadian Journal of Economics, 2012
    Co-Authors: Giancarlo Corsetti, Luca Dedola, Francesca Viani
    Abstract:

    We decompose the Backus-Smith [1993] statistic --- a low or negative correlation between relative consumption and the real exchange rate at odds with a high degree of International risk sharing --- in its dynamic components at different frequencies. Using multivariate spectral analysis techniques we show that, in most OECD countries, the dynamic correlation tends to be more negative, and significantly so, at Business Cycle or lower frequencies --- the appropriate frequencies for assessing the performance of International Business Cycle models. Theoretically, we show that the dynamic correlation predicted by standard open-economy models is the sum of two terms: a term constant across frequencies, which can be negative as a function of uninsurable risk; a term variable across frequencies, which in bond economies is necessarily positive, reflecting the insurance intertemporal trade provides against forecastable contingencies. We show that the main mechanisms proposed in the literature to account for the puzzle are consistent with the evidence.

Fabrizio Perri - One of the best experts on this subject based on the ideXlab platform.

  • The International Diversification Puzzle Is Not as Bad as You Think
    Journal of Political Economy, 2013
    Co-Authors: Jonathan Heathcote, Fabrizio Perri
    Abstract:

    The International diversification puzzle is the fact that country portfolios are on average biased toward domestic assets, while one-good International macro models with nondiversifiable labor income risk predict the opposite pattern of diversification. This paper embeds a portfolio choice decision in a two-good International Business Cycle model and provides a closed-form solution for equilibrium country portfolios. Equilibrium portfolios are biased toward domestic assets because endogenous International relative price fluctuations make domestic assets a good hedge against labor income risk. Evidence from developed economies in recent years is qualitatively and quantitatively consistent with the mechanisms highlighted by the theory. © 2013 by The University of Chicago. All rights reserved.

  • financial globalization and real regionalization
    Journal of Economic Theory, 2004
    Co-Authors: Jonathan Heathcote, Fabrizio Perri
    Abstract:

    Over the period 1972-86, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66 and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03, and -0.07 (real regionalization). At the same time, US International asset trade has significantly increased. For example, between 1972-99, United States gross FDI and equity assets in the same group of countries rose from 4 to 23% of the US capital stock (financial globalization). We document that the correlation of real shocks between the US and the rest of the world has declined. We then present a model in which International financial market integration occurs endogenously in response to less correlated shocks. Financial integration further reduces International correlations in GDP and factor supplies. We find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the International Business Cycle.

  • International Business Cycles with endogenous incomplete markets
    Econometrica, 2002
    Co-Authors: Patrick J Kehoe, Fabrizio Perri
    Abstract:

    Backus, Kehoe, and Kydland (1992), Baxter and Crucini (1995), and Stockman and Tesar (1995) find two major discrepancies between standard International Business Cycle models with complete markets and the data: In the models, cross-country correlations are much higher for consumption than for output, while in the data the opposite is true; and cross-country correlations of employment and investment are negative, while in the data they are positive. This paper introduces a friction into a standard model that helps resolve these anomalies. The friction is that International loans are imperfectly enforceable; any country can renege on its debts and suffer the consequences for future borrowing. To solve for equilibrium in this economy with endogenous incomplete markets, the methods of Marcet and Marimon (1999) are extended. Incorporating the friction helps resolve the anomalies more than does exogenously restricting the assets that can be traded.

  • financial autarky and International Business Cycles
    Journal of Monetary Economics, 2002
    Co-Authors: Jonathan Heathcote, Fabrizio Perri
    Abstract:

    We present a two-country, two-good model in which there do not exist any markets for International trade in financial assets. We compare the predictions of this model to those of two other models, one in which markets are complete and a second in which a single non-contingent bond is traded. We find that only the financial autarky model can generate volatility in the terms of trade similar to that in data for floating rate period and, at the same time, account for observed cross-country output, consumption, investment and employment correlations. We interpret our findings as evidence that the extent of International borrowing and lending opportunities is important for the International Business Cycle.

  • financial globalization and real regionalization
    National Bureau of Economic Research, 2002
    Co-Authors: Jonathan Heathcote, Fabrizio Perri
    Abstract:

    Over the period 1972-1986, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03 and -0.07 (real regionalization). At the same time, U.S. International asset trade has significantly increased. For example, between 1972 and 1999, United States gross FDI and equity assets in the same group of countries rose from 4 to 23 percent of the U.S. capital stock (financial globalization). We document that the correlation of real shocks between the U.S. and the rest of the world has declined. We then present a model in which International financial market integration occurs endogenously in response to less correlated shocks. Financial integration further reduces the International correlations in GDP and factor supplies. We find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the International Business Cycle.