Granular Financial Integration

Speaker: Liliana Varela, London School of Economics

Location: online or at Kiel Institute for the World Economy, Chausseestraße 111, 10115 Berlin

Organizers: Kiel Institute for the World Economy, CEPR

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Abstract: This paper studies the granularity of international financial integration by creating a unique, administrative, micro-level dataset covering the quasi-universe of France’s cross-border positions between 2014 and 2018. We show that France's financial integration is granular, as the top one percentile of firms account for almost 60% of France’s gross cross-border positions. Notably, these granular agents have a distinct cross-border investment pattern than the rest of (smaller) groups, resulting in a bimodal pattern of financial integration. In particular,  granular firms are well diversified across countries, while the rest of firms allocate all their cross-border investments in the European Union and Euro.