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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-9701.2009.01168.x Byline: Claudia M. Buch (1), Jorg Dopke (2), Harald Strotmann (3) Abstract: Abstract There is a widespread concern that increased trade may lead to increased instability and thus risk at the firm level. Greater export openness can indeed affect firm-level volatility by changing the exposure and the reaction of firms to macroeconomic developments. The net effect is ambiguous from a theoretical point of view. This paper provides firm-level evidence on the link between openness and volatility. Using comprehensive data on more than 21,000 German manufacturing firms for the period 1980-2001, we analyse the evolution of firm-level output volatility and the link between volatility and export openness. Our paper has three main findings. First, firm-level output volatility is significantly higher than the level of aggregate volatility, but it displays similar patterns. Second, increased export openness lowers firm-level output volatility. This effect is primarily driven by variations along the extensive margin, i.e. by the distinction between exporters and non-exporters. Variations along the intensive margin, i.e. the volume of exports, tend to have a dampening impact on volatility as well. Third, small firms are more volatile than large firms. Author Affiliation: (1)University of Tubingen, Germany, (2)University of Applied Sciences, Merseburg, Germany (3)Pforzheim University, Germany

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-9701.2008.01124.x Byline: Claudia M. Buch (1,2), Jorn Kleinert (1) Abstract: ABSTRACT Changes in exchange rates affect countries through their impact on cross-border activities such as trade and foreign direct investment (FDI). With increasing activities of multinational firms, the FDI channel is likely to gain in importance. Economic theory provides two main explanations why changes in exchange rates can affect FDI. According to the first explanation, FDI reacts to exchange rate changes if there are information frictions on capital markets and if investment depends on firms' net worth (capital market friction hypothesis). According to the second explanation, FDI reacts to exchange rate changes if output and factor markets are segmented, and if firm-specific assets are important (goods market friction hypothesis). We provide a unified theoretical framework of these two explanations. We analyse the implications of the model empirically using a dataset based on detailed German firm-level data. We find greater support for the goods market than for the capital market friction hypothesis. Author Affiliation: (1)University of Tubingen and (2)IAW

Has the introduction of the Euro fostered financial integration in Europe? We answer this question using a data set of banks' bilateral foreign assets and liabilities provided by the Bank for International Settlements. The data cover the pre-Euro period (1995-1998) and the post-Euro period (1999-2005). We use information from 10 OECD reporting countries and all OECD recipient countries. Gravity regressions show a positive and significant impact of the Euro on bilateral financial linkages. This effect is stronger and more robust for banks' foreign assets than for their foreign liabilities. Keywords: International banking, gravity models, Euro area JEL Classifications: F32, F42, F34, MOTIVATION Has the Euro promoted financial integration in Europe? (1) This question has been addressed in a series of research papers in recent years. This literature shows that money markets [...]