The Geography of Trade in Goods and Asset Holdings

Gravity models have been widely used to describe bilateral trade in goods. Recently, Portes and Rey [1999] applied this framework to cross border equity flows and found that distance, which proxies information asymmetries in financial markets, is a surprisingly very large barrier to cross-border asset trade. We adopt here a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings. We jointly study trade in goods and banking assets in a simultaneous gravity equations framework using different instruments for both endogenous variables. To instrument trade in goods, we choose geographical variables (excluding distance) and data on bilateral transport costs. For asset holdings, we use legal similarities between countries and data on the international taxation of withheld capital. We find that the strong correlation between bilateral trade in goods and asset holdings is not simply due to distance: bilateral trade in goods generates bilateral asset holdings and vice versa. Those effects are of first order magnitude: a 10% increase in trade generates a 6 to 7% increase of asset holdings, and a 10% increase in banking claims induces a 2 to 3% increase in trade. Finally, we investigate the question of the remaining impact of distance. We find out that the impact of distance on trade in goods is only slightly reduced, while for asset holdings, a large part of the effect of distance is going through trade.Gravity Models; International Finance; International Trade; Simultaneous Equations

Cross-Border Mergers and acquisitions: Financial and institutional forces

Cross-border mergers and acquisitions (M&As) sharply increased over the last two decades. It is often pointed out that cross-border capital reallocation is partly the result of financial liberalization policies, government policies and regional agreements. In this paper, we identify some of the main forces driving cross-border M&As using a unique database on bilateral cross-border M&As at the sectoral level (in manufacturing and services) over the period 1985-2004. We focus on the role of institutional and financial developments with a special attention to the role played by the European Integration process. We identify the impact of (i) joining the European Union and (ii) joining the Euro on cross-border M&As. We show that EU and EMU have almost doubled M&As in manufacturing towards their members from all over the globe, with an additional 50% increase within EMU countries. Conversely, the service sector did not exploit the opportunity offered by the single currency. We also show how cross-border M&As are linked to the acquirer expected profitability and provide insights on the effectiveness of policies to attract foreign capital (such as corporate tax incentives, and interventions to improve the country's financial system and product market regulations). JEL Classification: F30, F36, F41, G11Cross Mergers and Acquisitions, Euro, Gravity Equation

The geography of trade in goods and asset holdings

Gravity models have been widely used to describe bilateral trade in goods. Portes and Rey [Portes, R., Rey, H., 2005. The Determinants of Cross-Border Equity Flows. Journal of International Economics, 65(2), 269–296.] applied this framework to cross-border equity flows and found that distance, which proxies information asymmetries, is a surprisingly very large barrier to cross-border asset trade. We adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework. Providing different instruments for both endogenous variables, we show that a 10% increase in bilateral trade raises bilateral asset holdings by 6% to 7%. The reverse causality is also significant, albeit smaller. Controlling for trade, the impact of distance on asset holdings is drastically reduced. Keywords: Gravity models; International finance; International trade; Simultaneous equation

Cross-border mergers and acquisitions and European integration

Cross-border mergers and acquisitions activities (M&As) sharply increased over the last two decades, partly as a result of financial liberalization policies, government policies and regional agreements. In this paper, we identify some of the main forces driving M&As, using a unique database on bilateral cross-border M&As at the sectoral level (in manufacturing and services) over the period 1985–2004. The key empirical findings are: (1) EMU helped the restructuring of capital within the same sector of manufacturing activity among euro area firms; (2) joining the EU favoured both horizontal and vertical mergers; (3) policy-makers can help attract capital by reducing the corporate tax rates and the degree of product market regulations and by improving the country's financial systems; (4) the service industry has not yet fully benefited from European integration because the level of protection and barriers to entry in the services sector act as a strong deterrent to cross-border M&As in services

Cross-Border Mergers and acquisitions: Financial and institutional forces

Cross-border mergers and acquisitions (M&As) sharply increased over the last two decades. It is often pointed out that cross-border capital reallocation is partly the result of financial liberalization policies, government policies and regional agreements. In this paper, we identify some of the main forces driving cross-border M&As using a unique database on bilateral cross-border M&As at the sectoral level (in manufacturing and services) over the period 1985-2004. We focus on the role of institutional and financial developments with a special attention to the role played by the European Integration process. We identify the impact of (i) joining the European Union and (ii) joining the Euro on cross-border M&As. We show that EU and EMU have almost doubled M&As in manufacturing towards their members from all over the globe, with an additional 50% increase within EMU countries. Conversely, the service sector did not exploit the opportunity offered by the single currency. We also show how cross-border M&As are linked to the acquirer expected profitability and provide insights on the effectiveness of policies to attract foreign capital (such as corporate tax incentives, and interventions to improve the country's financial system and product market regulations)

DNA metabarcoding unveils multiscale trophic variation in a widespread coastal opportunist

A thorough understanding of ecological networks relies on comprehensive information on trophic relationships among species. Since unpicking the diet of many organisms is unattainable using traditional morphology‐based approaches, the application of high‐throughput sequencing methods represents a rapid and powerful way forward. Here, we assessed the application of DNA metabarcoding with nearly universal primers for the mitochondrial marker cytochrome c oxidase I in defining the trophic ecology of adult brown shrimp, Crangon crangon, in six European estuaries. The exact trophic role of this abundant and widespread coastal benthic species is somewhat controversial, while information on geographical variation remains scant. Results revealed a highly opportunistic behaviour. Shrimp stomach contents contained hundreds of taxa (>1,000 molecular operational taxonomic units), of which 291 were identified as distinct species, belonging to 35 phyla. Only twenty ascertained species had a mean relative abundance of more than 0.5%. Predominant species included other abundant coastal and estuarine taxa, including the shore crab Carcinus maenas and the amphipod Corophium volutator. Jacobs’ selectivity index estimates based on DNA extracted from both shrimp stomachs and sediment samples were used to assess the shrimp's trophic niche indicating a generalist diet, dominated by crustaceans, polychaetes and fish. Spatial variation in diet composition, at regional and local scales, confirmed the highly flexible nature of this trophic opportunist. Furthermore, the detection of a prevalent, possibly endoparasitic fungus (Purpureocillium lilacinum) in the shrimp's stomach demonstrates the wide range of questions that can be addressed using metabarcoding, towards a more robust reconstruction of ecological networks

RELATIVE FACTOR ENDOWMENTS AND INTERNATIONAL PORTFOLIO CHOICE

We present a model of international portfolio choice based on cross-country differences in relative factor abundance. Countries have varying degrees of similarity in their factor endowment ratios, and are subject to aggregate productivity shocks. Risk-averse consumers can insure against these shocks by investing their wealth at home and abroad. In a many-good setup, the change in factor prices after a positive shock in a particular country provides insurance to countries that have dissimilar factor endowment ratios, but is bad news for countries with similar factor endowment ratios, since their incomes will worsen. Therefore countries with similar relative factor endowments have a stronger incentive to invest in one another for insurance purposes than countries with dissimilar endowments. The importance of this effect depends on the size of countries. Empirical evidence linking bilateral international equity investment positions to a proxy for relative factor endowments supports our theory: the similarity of host and source countries in their relative capital–labor ratios has a positive effect on the source country’s investment position in the host country. The effect of similarity is enhanced by the size of host countries