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Too Domestic to Fail: Liquidity Provision and National Champions

Author

Listed:
  • Emmanuel Farhi

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse)

  • Jean Tirole

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse)

Abstract

Authorities' support policies shape the location and continuation of industrial and banking activity on their soil. Firms' locus of activity depends on their prospect of receiving financial assistance in distress and therefore on factors such as countries' relative resilience. We predict that global firms are global in life and national in death; and that they become less global when competition is more intense, times are turbulent, and international risk sharing (say, through swap lines) weak. We analyse the competitive benefits of industrial and banking policies as well as their limitations, such as currency appreciation.

Suggested Citation

  • Emmanuel Farhi & Jean Tirole, 2025. "Too Domestic to Fail: Liquidity Provision and National Champions," Post-Print hal-04906462, HAL.
    • Handle: RePEc:hal:journl:hal-04906462
    DOI: 10.1093/restud/rdae028
    Note: View the original document on HAL open archive server: https://hal.science/hal-04906462v1
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    References listed on IDEAS

    as
    1. Schoenmaker, Dirk, 2013. "Governance of International Banking: The Financial Trilemma," OUP Catalogue, Oxford University Press, number 9780199971596.
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