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
Economic geography; national champions; cross-border banking, liquidity support; too domestic to fail; home bias; exhorbitant duty, hegemon;
JEL codes
- D43: Oligopoly and Other Forms of Market Imperfection
- E58: Central Banks and Their Policies
- F33: International Monetary Arrangements and Institutions
- G15: International Financial Markets
- G21: Banks • Depository Institutions • Micro Finance Institutions • Mortgages
Reference
Emmanuel Farhi, and Jean Tirole, “Too Domestic to Fail: Liquidity Provision and National Champions”, The Review of Economic Studies, vol. 92, n. 1, January 2025, pp. 268–298.
See also
Published in
The Review of Economic Studies, vol. 92, n. 1, January 2025, pp. 268–298