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The Double-Edged Sword of Global Integration: Robustness, Fragility & Contagion in the International Firm Network

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  • Everett Grant
  • Julieta Yung

Abstract

We estimate global inter-firm networks across all major industries from 1981 through 2016 and provide the first empirical tests for both robust (beneficial) and fragile (harmful) network behavior, relating firms' health with global integration. More connected firms are less likely to be in distress and have higher profit growth and equity returns, but are also more exposed to direct contagion from distressed neighboring firms and network level crises. Our analysis reveals the centrality of finance in the international firm network and increased globalization, with greater potential for crises to spread globally when they do occur.

Suggested Citation

  • Everett Grant & Julieta Yung, 2017. "The Double-Edged Sword of Global Integration: Robustness, Fragility & Contagion in the International Firm Network," Globalization Institute Working Papers 313, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:313
    DOI: 10.24149/gwp313
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    Cited by:

    1. Hale, Galina & Lopez, Jose A., 2019. "Monitoring banking system connectedness with big data," Journal of Econometrics, Elsevier, vol. 212(1), pages 203-220.
    2. Everett Grant & Julieta Yung, 2019. "Upstream, Downstream & Common Firm Shocks," Globalization Institute Working Papers 360, Federal Reserve Bank of Dallas.

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    More about this item

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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