Aggregate gains of international diversification through foreign direct investment: An inquiry into the moderation of U.S. business cycles

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3 Citations (Scopus)

Abstract

Over the last 20 years the U.S. economy has experienced a strong reduction in the volatility of GDP growth. This paper documents and models the rapid growth of multinational corporations as a source of gradual decline in output and investment volatility. The paper introduces internationally diversified multinational firms into the financial accelerator framework; where international operations provide multinational firms with smoother paths of net worth that result in less volatile financing costs, investment and production. Model simulations suggest that larger multinational corporations can account for up to a 19 percent and 27 percent decline in output and investment volatility, respectively.

Original languageEnglish
Article number3
JournalGlobal Economy Journal
Volume7
Issue number4
StatePublished - 1 Dec 2007

Fingerprint

Moderation
Business cycles
Foreign direct investment
International diversification
Multinational firms
Multinational corporations
Net worth
Financial accelerator
Model simulation
GDP growth
Financing
US economy
International operations
Costs

Keywords

  • Aggregate volatility
  • Foreign direct investment
  • International diversification
  • Multinationals

Cite this

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