Multinational Corporations and the Moderation of U.S. Output Volatility

Luis San Vicente Portes ()
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Luis San Vicente Portes: Montclair State University

No 384, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: In the last 20 years the U.S. economy has experienced a strong reduction in the volatility of GDP growth. By some measures it has declined nearly by half. This paper identifies, documents and models the rapid growth of multinational corporations as a source of gradual decline in output and investment volatility. The paper introduces internationally diversified multinational firms into the financial accelerator framework; where international operations provide multinational firms with smoother paths of net worth that result in less volatile financing costs, investment and production. When calibrated to resemble the U.S. economy, model simulations suggest that larger multinational corporations imply up to a 19 percent and 27 percent decline in output and investment volatility, respectively

Keywords: Volatility of GDP; Multinational Corporations; Credit Market Frictions (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Date: 2006-07-04
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:384

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