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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

    (Federal Reserve Bank of Dallas)

Abstract

We use daily equity returns to estimate global inter-firm networks across all major industries from 1981-2016 and test whether the network is robust or fragile, relating multinational firms' overall 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 machine learning analysis reveals the centrality of finance in the international firm network and increased globalization over time, with greater potential for crises to spread globally when they do occur.

Suggested Citation

  • Everett Grant, 2018. "The Double-Edged Sword of Global Integration: Robustness, Fragility \& Contagion in the International Firm Network," 2018 Meeting Papers 506, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:506
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    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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