About

Stefania Garetto is an Associate Professor at Boston University in the Department of Economics. Her research focuses on economic topics related to her academic position, and she is involved in teaching and scholarly activities within the department. Her contact information is provided through her university email and departmental address, indicating her active engagement in academic and professional pursuits at Boston University.

Research topics

• Economics
• International economics
• Macroeconomics
• Financial system
• Finance
• Monetary economics
• Business
• Market economy

Selected publications

• Multinational Expansion in Time and Space

  RePEc: Research Papers in Economics

  articleOpen access1st authorCorresponding

  This paper studies the expansion patterns of the multinational enterprise (MNE) in time and space. Using a long panel of US MNEs, we document that: MNE affiliates grow by exporting to new markets; the activities of MNE affiliates persist during the affiliate's life, usually starting with sales to their host market and eventually expanding to export markets; and MNE affiliates' entry into new locations does not depend on the location of preexisting affiliates. Informed by these facts, we develop a multi-country quantitative dynamic model of the MNE that features heterogeneity in firm-level productivity, persistent aggregate shocks, and a rich structure of costs that affect MNE expansion. Importantly, MNE affiliates can decouple their locations of production and sales, and endogenously choose to enter or exit the host and the export markets. We introduce a compound option formulation that allows us to capture in a tractable way the rich heterogeneity that is observed in the data and that is necessary for quantitative analysis. Using the calibrated model, our quantitative application to Brexit reveals that export platforms are important for understanding the reallocation of MNE activity in time and space, and that the nature of the frictions to MNE activities matters for aggregate firm dynamics.

  OA PDF

• On the Origins of the Multinational Premium

  RePEc: Research Papers in Economics

  Senior authorCorresponding
  • Business
  • Economics
  • Finance

  How do foreign direct investment (FDI) dynamics relate to the risk premium of a firm? To answer this question, we compare the stock returns of US firms with different FDI and mergers and acquisitions (M&A) exposure to study the evolution of stock returns as firms expand into foreign markets. We document three empirical regularities. First, there are cross-sectional risk premia associated with both multinational activity and mergers and acquisitions. Second, firm-level stock returns decline when a firm undertakes M&A activity and with merger deepening. Third, future multinational acquirers already have higher stock returns compared with domestic non-acquirers prior to entering foreign markets, indicating that cross-sectional returns differentials are driven by selection based on common unobserved firm characteristics. We find that CEOs play a role in explaining the relationship between firms’ risk premia and foreign expansion. To rationalize these facts, we develop a dynamic model in which management attitudes shape the relationship between firm characteristics, selection into FDI, and risk premia.

  Publisher

• Global banking and the international transmission of shocks: A quantitative analysis

  Journal of International Economics · 2023 · 8 citations

  • Economics
  • Monetary economics
  • Financial system
  PublisherDOI

• On the Origins of the Multinational Premium

  Working paper series · 2021-12-23

  paratextOpen accessSenior author

  How do foreign direct investment (FDI) dynamics relate to the risk premium of a firm? To answer this question, we compare the stock returns of US firms with different FDI and mergers and acquisitions (M&A) exposure to study the evolution of stock returns as firms expand into foreign markets. We document three empirical regularities. First, there are cross-sectional risk premia associated with both multinational activity and mergers and acquisitions. Second, firm-level stock returns decline when a firm undertakes M&A activity and with merger deepening. Third, future multinational acquirers already have higher stock returns compared with domestic non-acquirers prior to entering foreign markets, indicating that cross-sectional returns differentials are driven by selection based on common unobserved firm characteristics. We find that CEOs play a role in explaining the relationship between firms' risk premia and foreign expansion. To rationalize these facts, we develop a dynamic model in which management attitudes shape the relationship between firm characteristics, selection into FDI, and risk premia.

  PublisherOA PDFDOI

• Multinational Expansion in Time and Space

  National Bureau of Economic Research · 2019-05-01 · 29 citations

  preprint1st authorCorresponding

  This paper studies the expansion patterns of the multinational enterprise (MNE) in time and space.Using a long panel of US MNEs, we document that MNE affiliates usually start with sales exclusively to the host market and eventually enter export markets, and that this extensive margin of expansion accounts for most of their sales growth.Informed by these facts, we develop a multi-country quantitative dynamic model of the MNE that features heterogeneity in firm-level productivity, persistent aggregate shocks, and a rich structure of costs that affect MNE expansion.Importantly, MNE affiliates can decouple their locations of production and sales, and endogenously choose to enter or exit the host and the export markets.We introduce a novel compound option formulation that allows us to capture in a tractable way the rich heterogeneity observed in the data, which is necessary for quantitative analysis.Using the calibrated model, our quantitative application to Brexit reveals that the nature of the frictions to MNE activities matters for understanding the reallocation of MNE activity in time and space and for predicting the effects of globalization shocks.

  PublisherDOI

• Multinational Expansion in Time and Space

  SSRN Electronic Journal · 2019-01-01 · 17 citations

  articleOpen access1st authorCorresponding
  PublisherDOI

• What are the Consequences of Global Banking for the International Transmission of Shocks? A Quantitative Analysis

  National Bureau of Economic Research · 2018-10-01 · 5 citations

  preprint

  The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose a structural model of global banking that can be used proactively to perform counterfactual analysis on the effects of alternative regulatory policies. The structure of the model mimics the US regulatory framework and highlights the organizational choices that banks face when entering a foreign market: branching versus subsidiarization. When calibrated to match moments from a sample of European banks, the model is able to replicate the response of the US banking sector to the European sovereign debt crisis. Our counterfactual analysis suggests that pervasive subsidiarization, higher capital requirements, or ad hoc policy interventions would have mitigated the effects of the crisis on US lending.

  PublisherDOI

• To Branch or not to Branch? A Quantitative Evaluation of the Consequences of Global Banks’ Organization

  2018 Meeting Papers · 2018-01-01 · 2 citations

  articleSenior author

  This paper starts by establishing a set of stylized facts about global banks with operations in the United States. First, we show evidence of selection into foreign markets: the parent banks of global conglomerates tend to be larger than national banks. Second, selection by size is related to the mode of foreign operations: foreign subsidiaries of global banks and their parents are systematically larger than foreign branches and their parents, in terms of deposits, loans, and overall assets. Third, the mode of foreign operations affects the response of global banks to shocks and how those shocks are transmitted across countries. To explain these facts, we develop a structural model global banking whose assumptions mimic the institutional details of the regulatory framework in the US. The model sheds light on the relationship between market access, regulation, and capital flows, and is used as a laboratory to perform counterfactual analysis on the effects of alternative regulatory policies.

  Publisher

• What are the Consequences of Global Banking for the International Transmission of Shocks? A Quantitative Analysis

  OpenBU (Boston University) · 2018-01-01 · 1 citations

  articleOpen access

  The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose a structural model of global banking that can be used proactively to perform counterfactual analysis on the effects of alternative regulatory policies. The structure of the model mimics the US regulatory framework and highlights the organizational choices that banks face when entering a foreign market: branching versus subsidiarization. When calibrated to match moments from a sample of European banks, the model is able to replicate the response of the US banking sector to the European sovereign debt crisis. Our counterfactual analysis suggests that pervasive subsidiarization, higher capital requirements, or ad hoc monetary policy interventions would have mitigated the effects of the crisis on US lending.

  PublisherOA PDF

• Becoming a Multinational: an Analysis of Market Access and Risk through Mergers

  RePEc: Research Papers in Economics · 2017-01-01

  preprintOpen access1st authorCorresponding

  We examine more than 2, 500 mergers that involve a US acquirer and a foreign target since 2001. Our analysis focuses on the comparison of the risk premium of US firms before and after they acquire a foreign firm for the first time. The objective of this study is to understand how foreign direct investment dynamics affect the risk premium of the acquiring firm by focusing on the merger event. In addition, our empirical analysis explores the characteristics of foreign investment that have a positive impact on risk premium. While there is strong evidence of the existence of a multinational risk premium, our analysis of firms' initial investment abroad shows that risk premia increase as the dates of announcement and completion of the deal approach. The risk premium in the quarters before announcement is significantly higher than the risk premium after the announcement and completion of the deal. This analysis motivates the construction of a model where firms' endogenous decisions to merge and agents' expectations generate a risk premium over firms that remain domestic only.

  Publisher

Frequent coauthors

• Lindsay Oldenski

  35 shared

• Natalia Ramondo

  Boston University

  29 shared

• José L. Fillat

  20 shared

• Arthur L. Smith

  6 shared

• Arthur V. Corea-Smith

  2 shared

• Martin Goetz

  2 shared

• Arthur V. Smith

  1 shared

Education

• Ph.D.

  University of Chicago