Exports Versus FDI Revisited: Does Finance Matter?

37 Pages Posted: 19 Jul 2010

See all articles by Claudia M. Buch

Claudia M. Buch

Deutsche Bundesbank

Iris Kesternich

KU Leuven - Department of Economics; Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Alexander Lipponer

Deutsche Bundesbank

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2010

Abstract

The crisis on international financial markets that started in 2007 has shown the potential links between the financial sector and the real economy. Exports and foreign direct investment (FDI) have declined, presumably not only because of a lack of demand, but also because of restricted access of firms to external finance. In this paper, we explore the impact of access to external finance on firms' choices to export or to engage in FDI. We simultaneously model a firm's decision to engage in FDI and in exports, and we assess the importance of financial factors for this choice (the extensive margin) as well as for the volume of activities (the intensive margin). We find that financial frictions matter, in particular for the decision to engage internationally.

Keywords: exports versus FDI, financial constraints, heterogeneity, multinational firms, productivity

JEL Classification: F2, G2

Suggested Citation

Buch, Claudia M. and Kesternich, Iris and Lipponer, Alexander and Schnitzer, Monika, Exports Versus FDI Revisited: Does Finance Matter? (May 2010). CEPR Discussion Paper No. DP7839. Available at SSRN: https://ssrn.com/abstract=1640361

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Iris Kesternich

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Alexander Lipponer

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Monika Schnitzer

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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