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Business and Economics > Investments: Stocks

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Cover IMF Working Papers
Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence
JaeBin Ahn
,
Chan Kim
,
Nan Li
, and
Andrea Manera
This paper examines the impact of Foreign Direct Investment (FDI) on knowledge diffusion by analyzing the effect of firm-level FDI activities on cross-border patent citations. We construct a novel firm-level panel dataset that combines worldwide utility patent and citations data with project-level greenfield FDI and crossborder mergers and acquisitions (M&A) data over the past two decades, covering firms across 60 countries. Applying a new local projection difference-indifferences methodology, our analysis reveals that FDI significantly enhances knowledge flows both from and to the investing firms. Citation flows between investing firms and host countries increase by up to around 10.6% to 13% in five years after the initial investment. These effects are stronger when host countries have higher innovation capacities or are technologically more similar to the investing firm. We also uncover knowledge spillovers beyond targeted firms and industries in host countries, which are particularly more pronounced for sectors closely connected in the technology space.
Keywords:
Greenfield FDI; Brownfield FDI; cross-border M&A; Inward FDI; Outward FDI; Knowledge spillover; Patent citation; LP-DiD; investing firm; FDI activity; FDI measure; impacts of FDI; Foreign direct investment; Spillovers; Absorptive capacity; Stocks; Global
Cover IMF Working Papers
Determinants of U.S. Business Investment
Emanuel Kopp
U.S. business investment has taken a serious toll during the global financial crisis and also in the recovery phase investment did not pick up as expected. What is surprising is that the alleged investment slowdown happened at a time of record corporate profits and retained earnings, highly supportive financial conditions, improved sentiment, rising equity valuations, and strong labor markets—factors established in supporting business investment. Applying accelerator models and Bayesian Model Averaging, this paper discusses the extent to which U.S. business investment has been unusual. Results suggest that cautious expectations of future aggregate demand growth explain most of the weakness in investment, and that the oil and gas sector accounts for a considerable portion of the investment slump. Consequently, the behavior of U.S. business investment in recent years has not been unusual once these factors are taken into account. Also, there is very little evidence for uncertainty holding back investment, or that firms’ financial measures "crowded out" capital expenditure.
Keywords:
WP; business investment; firm; investment growth; private fixed investment; accelerator models; Bayesian Model Averaging; investment gap; growth outcome; accelerator model; investment activity; equipment investment; consumption deflator; Private investment; Oil prices; Stocks; Bank credit; Global financial crisis of 2008-2009; Global
Cover IMF Working Papers
International Technology Sourcing and Knowledge Spillovers: Evidence from OECD Countries
Sophia Chen
and
Estelle Dauchy
How much do firms benefit from foreign R&D and through what channel? We construct a global network of corporate innovation using more than 1.5 million patents granted to firms in OECD countries. We test the “international technology sourcing” hypothesis that foreign innovation activities tap into foreign R&D and improve home productivity through knowledge spillovers. We find that firms with stronger inventor presence in technology frontier countries benefit disproportionately more from their R&D. The strength of knowledge spillovers depends on the direction of technology sourcing. Knowledge externality is larger for firms in technology frontier countries than for firms in non-frontier countries.
Keywords:
WP; frontier country; innovation activity; country control; production function; Knowledge spillovers; Patent; R&D; Network; Firm productivity; OECD country; source country; destination country; Spillovers; Total factor productivity; Stocks; Productivity; Global
Cover IMF Staff Country Reports
Norway: Financial Sector Assessment Program-Technical Note-Linkages and Interconnectedness in the Norwegian Financial System
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note reviews linkages and interconnectedness in the Norwegian financial system for Norway. Norway’s banks have important connections with global financial centers, but regional links are also important. Norwegian banks are very dependent on global financial centers as sources of funding and to hedge currency risks. Cross-sectoral exposures of Norway’s banks, insurance companies, and real estate companies are significant and extend beyond the Nordic region. The authorities are encouraged to expand their current monitoring efforts of crossborder and cross-sectoral exposures of the Norwegian financial sector, and to conduct regional stress tests. For this effect, the authorities can resort to market data and, if available, to balance sheet data of exposures at the individual financial institution level.
Keywords:
ISCR; CR; bank; covered bond; stock index; market; bank stress; funding model; crossborder bank claim; funding structure; banks probability; market data; bank level; Norway's bank; Commercial banks; Covered bonds; Credit; Stocks; Spillovers; Global
Cover Policy Papers
Provisional Agenda for the Twenty-Ninth Meeting of the International Monetary and Financial Committee
International Monetary Fund
The following is the provisional agenda for the Twenty-Ninth Meeting of the International Monetary and Financial Committee, which is to be convened at the IMF's Headquarters in Washington, D.C. on April 11, 2014.
Keywords:
PP; Policy agenda; policy coherence; HQ2 Conference Hall
Cover IMF Working Papers
Determinants of Financial Market Spillovers: The Role of Portfolio Diversification, Trade, Home Bias, and Concentration
Yoko Shinagawa
This paper defines financial market spillovers as the comovement between two countries’ financial markets and analyzes financial market spillovers over the period 2001-12 through four channels: bilateral portfolio investment, bilateral trade, home bias, and country concentration. The paper finds that, if a country has a large amount of bilateral portfolio exposure in another country, these two countries’ comovement of bond yields are large. Also, countries’ geographical preferences impact financial spillovers; if a country has a stronger home bias, the country could have less spillovers from foreign financial markets. A policy implication from this result is that, if countries become less home-biased and have a greater amount of portfolio investment assets, they should strengthen prudential regulations to mitigate against rising risks of financial spillovers (or risk greater volatility owing to comovement with foreign markets).
Keywords:
WP; market; asset holding; Financial Spillover; Coordinated Portfolio Investment Survey (CPIS); Home Bias; financial market spillover; market contagion; correlation vis-à-vis; heightened market instability; portfolio inflow; Spillovers; Portfolio investment; Stock markets; Stocks; Securities; Global
Cover IMF Staff Country Reports
German-Central European Supply Chain-Cluster Report: Staff Report, First Background Note, Second Background Note, Third Background Note
International Monetary Fund. European Dept.
This paper discusses key findings of the Cluster Report on German-Central European Supply Chain (GCESC). Since the 1990s, a GCESC has evolved, manufacturing goods for export to the rest of the world. Reflecting this, bilateral trade linkages between Germany and the Czech Republic, Hungary, Poland, and the Slovak Republic (CE4) have expanded rapidly. Participation in the GCESC has led to technology transfers to CE4 countries and accelerated income convergence. Export growth in knowledge-intensive sectors has been particularly rapid in the CE4. It is also observed that complementarities between supply chain activities and domestic production have led to greater synchronization of the business cycle among GCESC countries.
Keywords:
ISCR; CR; GDP; CE4 FDI; Germany; CE4 Countries Based; banking; trade linkage; stock position; exports to Germany; FDI stock; aggregate demand demand shock; safe haven status; Exports; Foreign direct investment; Financial statements; Spillovers; Stocks; Global; Asia and Pacific; Europe
Cover IMF Working Papers
Risk Exposures and Financial Spillovers in Tranquil and Crisis Times: Bank-Level Evidence
Jochen M. Schmittmann
For a sample of 83 financial institutions during 2003–2011, this paper attempts to answer three questions: first, what is the evolution of banks’ stock price exposure to country-level and global risk factors as approximated by equity indices; second, which bank-specific characteristics explain these risk exposures; third, are there clusters of banks with equity price linkages beyond market risk factors. The paper finds a rise in sensitivities to both country and global risk factors in 2011, although on average to levels still below those of the subprime crisis. The average sensitivity to European risk, specifically, has been steadily rising since 2008. Banks that are reliant on wholesale funding, have weaker capital levels and low valuations, and higher exposures to crisis countries are found to be the most vulnerable to shocks. The analysis of bank-to-bank linkages suggests that any “globalization” of the euro area crisis is likely to be channelled through U.K. and U.S. banks, with little evidence of direct spillover effects to other regions.
Keywords:
WP; BNP Paribas; bank beta; subprime crisis; bank fundamentals; equity risk; risk exposure; Financial sector; financial institutions; banks; Europe; financial crisis; spillovers; country beta; spillover effect; core EA bank distress; funding condition; B. bank Betas; share price; country market index; Stocks; Stock markets; Capital adequacy requirements; Global
Cover IMF Working Papers
Global Bonding: Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets?
Mr. Tamim Bayoumi
and
Mr. Trung T Bui
This paper uses a novel variant of identification through hetroscedacity to estimate spillovers across U.S., Euro area, Japanese, and UK government bond and equity markets in a vector autoregression. The results suggest that U.S. financial shocks reverberate around the world much more strongly than shocks from other regions, including the Euro area, while inward spillovers to the U.S. from elsewhere are minimal. There is also evidence of two-way spillovers between the UK and Euro area financial markets and spillovers from Europe to Japan. The results also suggest that the uncertainty about the direction of causality of contemporaneous correlations—an issue that other techniques cannot tackle—is the dominant source of uncertainty in the estimated impulse response functions.
Keywords:
WP; market; bond yield; bond market; coefficient; Identification; international financial linkages; UK bond yield shock; equity price; market closing; impulse response function; government bond market; spillover coefficient; Stock markets; Bond yields; Spillovers; Securities markets; Stocks; Global
Cover IMF Staff Country Reports
Japan: Spillover Report for the 2011 Article IV Consultation and Selected Issues
International Monetary Fund
Japan’s position is one of the largest and richest economies in the world. Tokyo as a financial marketplace is not a major intermediator of global capital flows. The current macroeconomic environment is conducive to spillovers being larger than captured by the empirical analysis. Apart from heading off tail risks, fiscal consolidation in Japan would have medium to long-term benefits for its partner countries. Exchange rate-related spillovers on foreign financial markets are found to be small and depend partly on policy developments abroad.
Keywords:
ISCR; CR; Japan; interest rate; carry trade; exchange rate; financial market; trade surplus; banking system; real GDP; spillover issue; Exports; Fiscal consolidation; Spillovers; Stocks; Yield curve; Global; Asia and Pacific; Europe