Still standing: how European firms weathered the crisis - The third EFIGE policy report

This research output confirms the strength of the approach underpinning the EFIGE project, which is based on the recognition that firms are heterogeneous in the extent and the pattern of their internationalisation, as they are in many other respects. The project provides more, and more precise, evidence of what makes firms successful and therefore also what makes countries successful in the context of globalisation. Internationalisation, however, also makes firms vulnerable to shocks affecting international trade and may transform them into agents of propagation of global downturns. At the time of the Great Recession of 2009, there was intense speculation about the reasons why trade collapsed much more than output. It was sometimes claimed that global supply chains were not only propagators, but also multipliers of international fluctuations. This report by László Halpern and his colleagues makes use of the fact that the EFIGE survey was â?? by accident â?? conducted in 2009 and â?? by design â?? included questions about the firmsâ?? response to the global crisis. It provides a fascinating account of what happened to them in an especially turbulent environment. The stylised facts presented in this report are important to bear in mind at a time when Europe is heading for another severe downturn.

Financial Globalization, Portfolio Diversification, and the Pattern of International Trade

The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure rather than specializing according to their comparative advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in financially open countries is (i) higher, (ii) more dependent on productivity differences, and (iii) less sensitive to industry risks.Markets;Economic models;international trade, financial markets, globalization, financial globalization, international financial, international financial markets, financial integration, volume of trade, trade barriers, trade flows, capital flows, trade volume, world output, trade structure, full liberalization, net exports, pattern of trade, pattern of specialization, trade costs, bilateral trade, multilateral trade, trade dependence, political economy, industry trade, trade patterns, world trade, equilibrium model, access to international financial markets, product differentiation, domestic consumption, closed economies, trade theory, closed economy, open economies, factor price, export industries, economic integration, global integration, trade model, comparative advantage index, net exporter, trade imbalances, trade volumes, factor endowments, foreign trade, metal products, foreign assets, liberal trade policies, trade data, regional trade, world prices, intermediate scenarios, forward market, trade openness, imperfect competition, elasticity of substitution, measure of trade, foreign asset, border trade, international standard, globalization process, factor price equalization, national borders, transport equipment, world market, asset market, trade policies, market integration, commodity prices, export performance, world industry, trade models, liberal trade, tariff rates