Financing FDI into developing economies and the international transmission of business cycle fluctuations
Diemo Dietrich
Swiss Journal of Economics and Statistics,
2004
Abstract
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Why do we have an interbank money market?
Jürgen Wiemers, Ulrike Neyer
IWH Discussion Papers,
No. 182,
2003
Abstract
The interbank money market plays a key role in the execution of monetary policy. Hence, it is important to know the functioning of this market and the determinants of the interbank money market rate. In this paper, we develop an interbank money market model with a heterogeneous banking sector. We show that besides for balancing daily liquidity fluctuations banks participate in the interbank market because they have different marginal costs of obtaining funds from the central bank. In the euro area, which we refer to, these cost differences occur because banks have different marginal cost of collateral which they need to hold to obtain funds from the central bank. Banks with relatively low marginal costs act as intermediaries between the central bank and banks with relatively high marginal costs. The necessary positive spread between the interbank market rate and the central bank rate is determined by transaction costs and credit risk in the interbank market, total liquidity needs of the banking sector, costs of obtaining funds from the central bank, and the distribution of the latter across banks.
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Investment Behaviour of Financially Constrained Multinational Corporations: Consequences for the International Transmission of Business Cycle Fluctuations
Diemo Dietrich
IWH Discussion Papers,
No. 165,
2002
Abstract
The paper investigates the investment decision of a financially constrained multinational
corporation (MNC) planning investment projects both at home and in a developing
country. The collateral values of the projects diverge because of country specific
transactions costs so that the willingness of banks to grant a loan depends not only on
the MNCs financial wealth but also on the share of FDI in total investment. It is shown
that i) variations in the MNCs financial standing affects FDI stronger than domestic
investment, ii) FDI is likely to decrease following a macroeconomic shock to the MNC
parent, and iii) domestic investment is likely to increase following a macroeconomic
shock to the MNC affiliate.
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Business fluctuations in the service sector
Thorsten Wichmann
IWH Discussion Papers,
No. 54,
1997
Abstract
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