Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121041
Authors: 
Portes, Luis San Vicente
Year of Publication: 
2010
Series/Report no.: 
FIW Working Paper 41
Abstract: 
This paper assesses the role of financial frictions and Foreign Direct Investment (FDI) on an economy´s growth rate, business cycle volatility, and firm´s capital structure. We gauge these effects within the Financial Accelerator framework, where entrepreneurs can establish affiliates of local firms abroad through Foreign Direct Investment. Model simulations suggest that in the presence of credit market imperfections FDI is associated with faster growth, less leverage, and lower aggregate volatility. These features are consistent with the macroeconomic dynamics of the more globally integrated economies over the last three decades.
Subjects: 
Output volatility
Foreign Direct Investment
International Diversification
Capital Structure
JEL: 
F43
E32
G32
Document Type: 
Working Paper

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