The indirect effects of foreign direct investment on trade: A network perspective

The relationship between international trade and foreign direct investment (FDI) is one of the main features of globalisation. In this paper, we investigate the effects of FDI on trade from a network perspective, since FDI takes not only direct but also indirect channels from origin to destination countries because of firms’ incentive to reduce tax burden, to minimise coordination costs and to break barriers to market entry. We use a unique data set of international corporate control as a measure of stock FDI to construct a corporate control network (CCN), where the nodes are the countries and the edges are the corporate control relationships. Network measures, as the shortest path length and the communicability, are then computed on the CCN to capture the indirect channel of FDI. Empirically, we find that corporate control has a positive effect on trade both directly and indirectly. The result is robust with different specifications and estimation strategies. Hence, our paper provides strong empirical evidence of the indirect effects of FDI on trade. Moreover, we identify a number of interplaying factors such as regional trade agreements and the region of Asia. We also find that the indirect effects are more pronounced for the manufacturing sector than for primary sectors such as oil extraction and agriculture.     

Bond Pricing with a Time‐Varying Price of Risk in an Estimated Medium‐Scale Bayesian DSGE Model

New Keynesian model in which households have Epstein–Zin preferences with time‐varying risk aversion and the central bank has a time‐varying inflation target can match the dynamics of nominal bond prices in the U.S. economy well. The model generates a large steady‐state term spread and its fitting errors for bond yields are comparable to those obtained from a nonstructural three‐factor model, and one‐third smaller than in models with a constant inflation target or risk aversion. Including data on interest rates has large effects on variance decompositions, making investment technology shocks much less important than found in other recent papers.     

GDP nowcasting: application and constraints in a small open developing economy

Despite data limitations, an attempt is made to find out if a GDP nowcasting model can provide reliable forecasts for a small open economy. Two competing Bayesian vector autoregressive models are tested rigorously to obtain the optimal model by minimizing in-sample forecasting errors. The main finding of this study is that GDP nowcasting can produce reliable results for a small open economy despite the unavailability of sufficient data sets and the lack of high frequency indicators.     

Estimating input-mix efficiency in a parametric framework: application to state-level agricultural data for the United States

ABSTRACT

This paper contributes to the productivity literature by demonstrating novel econometric methods to estimate input-mix efficiency (IME) in a parametric framework. Input-mix efficiency is defined as the potential improvement in productivity with change in input mix. Any change in input-mix (e.g., land to labou r ratio) will result in change in productivity. The advantage of this approach is that it does not require data on input prices to estimate the mix efficiency levels. A nonlinear input-aggregator function (e.g., Constant Elasticity of Substitution) is used to derive an expression for input-mix efficiency. Bayesian stochastic frontier is estimated for obtaining mix efficiency using US state-level agricultural data for the period 1960–2004. Significant variation in input-mix efficiency is noted across the states and regions, attributable to diverse topographic and geographic conditions. Furthermore, comparisons of allocative and mix efficiencies provide insightful policy implications. The production incentives such as taxes and subsidies could help farmers in adjusting their input mix in response to changes in input prices, which can affect the US agricultural productivity significantly. The proposed methodology can be extended by i) using flexible functional forms; ii) introducing various time- and region-varying input aggregators; and iii) defining more sophisticated weights for input aggregators.     

Financial integration and banking crisis. A critical analysis of restrictions on capital flows

We investigate the effect of financial integration on a banking crisis. In contrast to existing works, we allow for capital restrictions while studying the impact of financial integration on a banking crisis. Using firm-level lending and borrowing information in the global market of syndicated loans; we generate aggregate measures of financial integration and examine how countries with capital flow restrictions thrive in the wake of a banking crisis. We concentrate on basic network measures of integration for a panel of 62 countries that allow for capital restriction at any time within the sample period. Financial integration increases the incidence of a banking crisis, and capital restrictions worsen a banking crisis. However, capital restrictions reduce the negative impact of financial integration on the incidence of a banking crisis. Thus, financial integration becomes beneficial when countries allow for some forms of capital control.     

Fancy Bitcoin and conventional financial assets: Measuring market integration based on connectedness networks

We investigate the relationship between Bitcoin and conventional financial assets from a perspective on the connectedness of asset networks. We adopt the method of measuring connectedness proposed by Diebold and Yilmaz (2009, 2012, and 2014) in a VAR system to study the dynamic interdependence between returns in Bitcoin, stocks, oil, and gold. We find that the connectedness between bitcoin and conventional assets is weak. The separation of positive and negative returns in the Bitcoin market shows the existence of an asymmetric pattern of the spillover effects between Bitcoin and conventional assets. A rolling window analysis finds that although Bitcoin prices experience a rising link to other financial assets, the magnitude is proven to be moderate. However, connectedness via negative returns is much stronger than via positive ones and exhibits a clearly increasing trend in recent periods. Our results in application are generally robust to other popular cryptocurrencies, such as ETH and Ripple. The findings presented in this paper have important implications for financial market participants, policymakers, and researchers in light of projected increases in the adoption of Bitcoin, as well as the rapid development of cryptocurrency.     

Identifying the ‘knowledge base’ or ‘intellectual structure’ of research on international business, 2000–2015: A citation/co-citation analysis of JIBS

The purpose of this study consists in analyzing the existing literature on international business from all the research papers published in Journal of International Business Studies (JIBS) during the period of time comprised between 2000 and 2015. The authors apply bibliometric methods to that end –in particular, document citation and co-citation analyses (DCAs)– so that they can try and identify the main research lines within the aforementioned scientific field or domain; in other words, the ‘intellectual structure’ of the discipline examined. Social networks analysis was also used to carry out the representation or visualization of such structure or knowledge base. The highly interdisciplinary nature of the research undertaken, since the study field still keeps its characteristic diversity and interdisciplinarity or the need to integrate a variety of theoretical frameworks or approaches into the development of a widely-accepted theory about the field under study become evident. Amongst these theories would be the new institutional theory, the strategic theory or perspective or others such as the transaction cost theory or the agency theory, applied to the context of internationalization and to the field of international business, on whose integration the future development of this field may largely depend.