TITLE: ASSESSING TRADE, FDI,
AND PORTFOLIO INTEGRATION
ON INTERNATIONAL BUSINESS
CYCLE COMOVEMENT
Introduction
- Business cycle fluctuations
create economic uncertainty and
require costly adjustment. Thus
policymakers aim to stabilize
domestic cycles.
- However, countries' business
cycles are interdependent due to
common shocks and cross-border
transmission channels like trade,
FDI, and portfolio flows.
Literature Review
- Trade integration:
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
- Inter-industry trade leads to
divergence as countries
specialize. Intra-industry trade
leads to synchronization.
- Empirical evidence is mixed.
Some find trade increases
synchronization, others find no
effect.
- Micro-evidence shows vertical
trade in intermediate inputs
causes more synchronization than
final goods trade.
- FDI integration:
- Theoretical predictions are
ambiguous. Horizontal FDI could
increase synchronization but
vertical FDI for cost efficiency
may not.
- Empirical evidence is mixed.
Some find positive effects, others
find no effect or negative effects.
- Entry mode may matter.
Greenfield FDI could have more
impact than M&A FDI.
- Financial integration:
- Equity market integration can
cause divergence via risk sharing.
Debt market integration can
cause synchronization via balance
sheet effects.
- Empirical evidence is mixed.
Short-term debt integration
seems to increase synchronization
more.
Data and Methods
- Dependent variable: SYNCH = -|
Growthi - Growthj|
- Explanatory variables: Trade
integration, FDI integration,
portfolio integration
- Estimation: Panel regression with
country-pair, home-year, partner-
year fixed effects
Results
- Trade: Intermediate input trade
increases synchronization. Final
goods trade has no effect.
- FDI: No contemporaneous effect
but greenfield FDI increases
synchronization with lags.
- Portfolio: Short-term debt
integration increases
synchronization the most.
- Time-varying results:
- Trade: After GFC, intermediate
input trade had stronger positive
effects.
- FDI: Greenfield FDI had
negative effects on
synchronization.
- Portfolio: Short-term debt
consistently increased
synchronization.
- Advanced countries:
- Equity integration increased
synchronization within advanced
countries.
- Short-term debt integration
increased synchronization
between advanced and other
countries.
- East Asia:
- FDI into East Asia from other
regions reduced synchronization.
Conclusion
- Different types of real and
financial integration affect
business cycle synchronization
differently.
- Intermediate input trade and
short-term debt integration
increase synchronization the
most.
- Need to examine country-
specific and time-varying
heterogeneity.
