Too Domestic to Fail: Liquidity Provision and National Champions

Emmanuel Farhi and Jean Tirole
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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

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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.

Keywords: Exhorbitant duty; Hegemon; Economic geography; National champions; Cross-border banking; Liquidity support; Too domestic to fail; Home bias (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-fdg, nep-int, nep-mic and nep-opm
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Published in Review of Economic Studies, 2025, 92 (1), pp.268-298. ⟨10.1093/restud/rdae028⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04906462

DOI: 10.1093/restud/rdae028

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