Intangible Capital Formation, International Equity Investments, and Output Synchronization

Baldi, Guido; Bodmer, André (June 2018). Intangible Capital Formation, International Equity Investments, and Output Synchronization (Discussion Papers 18-10). Bern: Department of Economics

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We analyze the effects of intangible investment on international output synchronization. Using a dynamic stochastic general equilibrium model, we find that an increase in the importance of intangible capital leads to a higher degree of output comovement across countries. Therefore, countries in which intangible capital is more important are better suited to economic integration, such as forming a monetary union. This offers an insightful perspective on the potential relation between the considerable differences in intangible capital among Eurozone members and the discussion surrounding the Eurozone as a suboptimal currency area. A high stock of intangible capital also tends to attract foreign equity investments, in particular foreign direct investments. We find that cross-border equity holdings in tangible and intangible capital further increase the degree of output synchronization. Our results imply that policy reforms to incentivize higher intangible capital formation and cross-border equity investments may not only foster economic growth but also improve the functioning of the monetary policy in the Eurozone.

Item Type:

Working Paper


03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Baldi, Guido and Bodmer, André


300 Social sciences, sociology & anthropology > 330 Economics


Discussion Papers


Department of Economics




Lars Tschannen

Date Deposited:

31 Aug 2020 17:11

Last Modified:

31 Aug 2020 17:11

JEL Classification:

E22, E32, F41




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