The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions

Clemens C, Heinemann M (2013) Working Papers in Economics and Management; 21-2013.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.

Download
OA
Working Paper | Published | English
Author
;
Abstract
This paper examines the consequences of international financial integration in a two–sector heterogeneous–agent dynamic general equilibrium model of occupational choice with financial constraints and idiosyncratic risks. We discuss the macroeconomic and distributional effects of financial market integration for small economies which differ only with respect to the tightness of constraints on the domestic credit market. The results contribute to an explanation for the ‘Lucas paradox’, i.e. the empirical observation of capital flowing from poor to rich countries, where lending countries are characterized by tighter domestic constraints and lower capital returns. Capital market liberalization goes along with adjustments towards the world return. Capital–exporting countries experience an increase in GNP, whereas the GDP effect is of ambiguous sign and driven by the tightness of the domestic credit market. Countries with less tight constraints or unlimited access to external business financing loose throughout integration due to a decline in aggregate output and a very unequal distribution of welfare gains and losses in the underlying heterogeneous–agent economy. We find that international integration is only beneficial f or economies where financial constraints on entrepreneurial activity are very tight. Here, we observe an accumulation–driven rise in the entrepreneurship rate, overall positive output effects and welfare gains for all members of society.
Publishing Year
ISSN
PUB-ID

Cite this

Clemens C, Heinemann M. The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions. Working Papers in Economics and Management. Vol 21-2013. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2013.
Clemens, C., & Heinemann, M. (2013). The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions (Working Papers in Economics and Management, 21-2013). Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Clemens, C., and Heinemann, M. (2013). The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions. Working Papers in Economics and Management, 21-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Clemens, C., & Heinemann, M., 2013. The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions, Working Papers in Economics and Management, no.21-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
C. Clemens and M. Heinemann, The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions, Working Papers in Economics and Management, vol. 21-2013, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013.
Clemens, C., Heinemann, M.: The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions. Working Papers in Economics and Management, 21-2013. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2013).
Clemens, Christiane, and Heinemann, Maik. The Effects of International Financial Integration in a Model with Heterogeneous Firms and Credit Frictions. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013. Working Papers in Economics and Management. 21-2013.
All files available under the following license(s):
Copyright Statement:
This Item is protected by copyright and/or related rights. [...]
Main File(s)
Access Level
OA Open Access
Last Uploaded
2017-12-01T12:59:40Z

This data publication is cited in the following publications:
This publication cites the following data publications:

Export

0 Marked Publications

Open Data PUB

Search this title in

Google Scholar