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Financing Multinationals

Author

Listed:
  • Jingting Fan

    (Penn State University)

  • Wenlan Luo

    (Tsinghua University)

Abstract

This paper develops a quantitative framework to study the determinants and welfare implications of MNCs, considering jointly the transfer of technological capital and financial capital. The framework integrates two main ingredients: capital accumulation under financial constraint in dynamic models (Moll 2014), and cross-country entry decisions in static studies of multinationals (Arkolakis et al. 2015). We calibrate the model to an economy with 25 major developed and developing countries. We perform counterfactual experiments to understand: 1) the importance of financial development in driving the FDI patterns; 2) the transitional dynamics after financial reforms; 3) the interaction between welfare gains from openness to MNCs and domestic financial institution.

Suggested Citation

  • Jingting Fan & Wenlan Luo, 2018. "Financing Multinationals," 2018 Meeting Papers 1277, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:1277
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