Globalisation: Recent traits and challenges

• Author: Ana Cuadros,Javier Ordóñez
• DOI: http://doi.org/10.1111/twec.12883
• Published date: 01 March 2020
• Date: 01 March 2020

530

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wileyonlinelibrary.com/journal/twec World Econ. 2020;43:530–533.

© 2019 John Wiley & Sons Ltd

Received: 6 June 2019

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Accepted: 11 September 2019

DOI: 10.1111/twec.12883

SPECIAL ISSUE ARTICLE

Globalisation: Recent traits and challenges

AnaCuadros

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JavierOrdóñez

Universitat Jaume I and Instituto de Economía Internacional (IEI), Castello de la Plana, Spain

This issue is focused on key concerns in the recent international context, such as the determinants and

effects of capital flows (in terms of both foreign direct investment [FDI] and mergers and acquisitions

[M&As]), or multinational enterprises (MNEs) relocating their productive activities. This last phe-

nomenon has brought the concept of global value chains (GVCs) to the fore. Moreover, the significant

rise of imported intermediate inputs in domestic production is one of the most important factors ex-

plaining the recent evolution of international trade. Due to its direct linkage to the relocation of jobs

abroad, global sourcing is often perceived fearfully, which has led to the recent surge in protectionist

ideas. The Brexit vote stands as a good example. The papers included also deal with topics such as the

increase in R&D collaboration across national borders and the role of ratifying international conven-

tions as an effective way to enhance institutional quality and promote trade flows.

The global financial crisis (GFC) has revealed the downsides of financial globalisation. As coun-

tries become more interconnected, adverse shocks in foreign countries threaten domestic stability

through contagion effects. Financial globalisation also erodes banks' and corporations' room to man-

age external assets and liabilities, as they face post‐credit‐crunch multiple yield curves. The GFC has

also revealed that conventional monetary policy may no longer be effective in achieving its goals and

unconventional monetary policy has been put in place. Contagion and pass‐through effects are also

relevant for developing countries and may influence both the implementation of monetary policy as

well as the adjustment mechanism for current account imbalances in an increasingly unstable geopo-

litical environment.

The first article by Julian Donaubauer, Eric Neumayer and Peter Nunnenkamp covers the impact

of financial market development (FMD) on bilateral FDI. Although there seems to be a consensus that

better financial markets encourage FDI, most existing studies consider financial development from

just one side of the source‐host pair. The main novelty of this study lies in its exploration of whether

the effects of source and host‐country FMD are conditional on each other. Their estimations of a grav-

ity‐type model reveal positive and substantive independent effects of both source and host‐country

FMD on FDI. Although the results reveal no conditionality in the global sample, when the authors

restrict the host countries to developing countries, they find that FMD in source and host countries

function as substitutes for each other.

In the second paper, Octavio Escobar and Henning Muhlen contribute to the understanding of the

growth‐enhancing effects of FDI in a host country. According to their analysis, FDI positively affects

structural change through labour reallocation towards more productive sectors. However, this positive

effect critically depends on the lag structure of FDI and stems from direct investments in sectors such