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Multinational Corporations and the Moderation of U.S. Output Volatility

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  • Luis San Vicente Portes

    () (Montclair State University)

Abstract

In the last 20 years the U.S. economy has experienced a strong reduction in the volatility of GDP growth. By some measures it has declined nearly by half. This paper identifies, 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. When calibrated to resemble the U.S. economy, model simulations suggest that larger multinational corporations imply up to a 19 percent and 27 percent decline in output and investment volatility, respectively

Suggested Citation

  • Luis San Vicente Portes, 2006. "Multinational Corporations and the Moderation of U.S. Output Volatility," Computing in Economics and Finance 2006 384, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:384
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    More about this item

    Keywords

    Volatility of GDP; Multinational Corporations; Credit Market Frictions;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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