Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian Model Averaging

The main objective of this paper is to examine the determining factors of outward FDI from four major OECD investors US, Germany, France and the Netherlands to developing countries located in different world regions. Our goal is to elucidate whether the motivation for FDI differs among these investors. Rather than relying on specific theories of FDI determinants we examine them all simultaneously employing Bayesian Model Averaging (BMA) in a panel data set with 129 FDI destinations in 5 geographical regions over the period 1995-2008. This approach permits us to select the most appropriate model that governs FDI allocation and to distinguish robust FDI determinants. We find that all our investors search for destinations with whom they have established intensive trade relations and that offer a qualified labor force. However, low wages and attractive tax rates are robust investment criteria too, and a considerable share of FDI is still resource-driven. Our investors show fairly similar strategies in the main FDI destinations.FDI determinants, Bayesian Model Averaging, OECD, Developing countries, US, Germany, France, Netherlands

Has Integration Promoted Business Cycle Synchronization in the Enlarged EU?

This paper examines whether European integration, manifesting itself in increased trade and FDI linkages, new specializations and economic policy coordination, contributed to the synchronization of business cycles in the enlarged EU. We estimate the effects on bilateral growth rate correlations in 1995-2008 in a simultaneous equations model which permits to model endogenous relationships and unveil direct and indirect effects. Trade and FDI prove to have a strong impact on synchronization, specifically between incumbent and new EU members. More coordinated fiscal policies and, particularly in EU 15, the alignment of monetary policies promoted synchronization. Nevertheless, flexible exchange rates remained important adjustment instruments for the new member states. Increasing manufacturing specialization is not counteracting synchronization. The achieved EU income convergence, a declared objective of EU policy, supported business cycle synchronization.Business cycles, transmission channel, FDI, trade, monetary union, EU

Have Consumption Risks in the G7 Countries Become Diversified?

This paper studies the dynamics of international consumption risk sharing among the G7 countries. Based on the dynamic conditional correlation model due to Engle (2002), we construct a time-varying, consumption-based measure of risk sharing. We find that although the exposure to countryspecific shocks has declined in the G7 countries, with Japan being an exception, the evolution of risk sharing is rather heterogeneous across countries.Dynamic conditional correlation, consumption risk sharing

International Spillovers of Output Growth and Output Growth Volatility: Evidence from the G7

This paper examines the transmission of GDP growth and GDP growth volatility among the G7 countries over the period 1960 q1 - 2009 q3, using a multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model to identify the source and magnitude of spillovers. Results indicate the presence of positive own-country GDP growth spillovers in each country and of cross-country GDP growth spillovers among most of the G7 countries. In addition, the large number of significant own-country output growth volatility and cross-country output growth volatility spillovers indicates that output growth shocks in most of the G7 countries affect output growth volatility in the remaining others. An additional finding is that U.S. is the dominant source of GDP growth volatility transmission, as its volatility exerts a significant unidirectional spillover to all remaining G7 countries.Business cycle transmission, Spillovers, Recession

The Synchronization of GDP Growth in the G7 during U.S. Recessions. Is this Time Different?

Using the dynamic conditional correlation (DCC) model due to Engle (2002), we estimate time varying correlations of quarterly real GDP growth among the G7 countries. In general, we find that rather heterogeneous patterns of international synchronization exist during U.S. recessions. During the 2007 - 2009 recession, however, international co-movement increased substantially.Dynamic conditional correlation, Business cycle synchronization, Recession

High-frequency homogenization of zero frequency stop band photonic and phononic crystals

We present an accurate methodology for representing the physics of waves, for periodic structures, through effective properties for a replacement bulk medium: This is valid even for media with zero frequency stop-bands and where high frequency phenomena dominate. Since the work of Lord Rayleigh in 1892, low frequency (or quasi-static) behaviour has been neatly encapsulated in effective anisotropic media. However such classical homogenization theories break down in the high-frequency or stop band regime. Higher frequency phenomena are of significant importance in photonics (transverse magnetic waves propagating in infinite conducting parallel fibers), phononics (anti-plane shear waves propagating in isotropic elastic materials with inclusions), and platonics (flexural waves propagating in thin-elastic plates with holes). Fortunately, the recently proposed high-frequency homogenization (HFH) theory is only constrained by the knowledge of standing waves in order to asymptotically reconstruct dispersion curves and associated Floquet-Bloch eigenfields: It is capable of accurately representing zero-frequency stop band structures. The homogenized equations are partial differential equations with a dispersive anisotropic homogenized tensor that characterizes the effective medium. We apply HFH to metamaterials, exploiting the subtle features of Bloch dispersion curves such as Dirac-like cones, as well as zero and negative group velocity near stop bands in order to achieve exciting physical phenomena such as cloaking, lensing and endoscope effects. These are simulated numerically using finite elements and compared to predictions from HFH. An extension of HFH to periodic supercells enabling complete reconstruction of dispersion curves through an unfolding technique is also introduced

The Synchronization of GDP Growth in the G7 during U.S. Recessions. Is this Time Different?

Using the dynamic conditional correlation (DCC) model due to Engle (2002), we estimate time varying correlations of quarterly real GDP growth among the G7 countries. In general, we find that rathe heterogeneous patterns of international synchronization exist during U.S. recessions. During the 2007 - 2009 recession, however, international co-movement increased substantially.Dynamic conditional correlation, Business cycle synchronization, Recession

Dynamic spillovers of oil price shocks and economic policy uncertainty

This study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil-exporting and net oil-importing countries over the period 1997:01–2013:06. To achieve that, an extension of the Diebold and Yilmaz (2009, 2012) dynamic spillover index based on structural decomposition is employed. The results reveal that economic policy uncertainty (oil price shocks) responds negatively to aggregate demand oil price shocks (economic policy uncertainty shocks). Furthermore, during the Great Recession of 2007–2009, total spillovers increase considerably, reaching unprecedented heights. Moreover, in net terms, economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009, while in the post-2009 period there is a significant role for supply-side and oil specific demand shocks, as net transmitters of spillover effects. These results are important for policy makers, as well as, investors interested in the oil market

Dynamic co-movements of stock market returns, implied volatility and policy uncertainty

We examine time-varying correlations among stock market returns, implied volatility and policy uncertainty. Our findings suggest that correlations are indeed time-varying and sensitive to oil demand shocks and US recessions. Highlights: We examine dynamic correlations of stock market returns, implied volatility and policy uncertainty. Dynamic correlations reveal heterogeneous patterns during US recessions. Aggregate demand oil price shocks and US recessions affect dynamic correlations. A rise in the volatility of policy uncertainty dampens stock market returns and increases uncertainty. Increases in stock market volatility reduce stock market returns and increase uncertainty