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  5. Modern International Finance: Technology, Intangibles and the Digital Economy
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Modern International Finance: Technology, Intangibles and the Digital Economy

Paper Session

Sunday, Jan. 4, 2026 10:15 AM - 12:15 PM (EST)

Loews Philadelphia Hotel, Commonwealth Hall D
Hosted By: American Finance Association
  • Laura Veldkamp, Columbia University

Production, Trade, and Cross-Border Data Flows

Qing Chang
,
Tsinghua University
Will Cong
,
Nanyang Technological University
Liyong Wang
,
Central University of Finance and Economics
Longtian Zhang
,
Central University of Finance and Economics

Abstract

We build a tractable general equilibrium model to analyze the effects of cross-border data flows and pre-existing development gaps in digital economies on each country's production and international trade. Raw data as byproducts of consumption can be transformed into various types of working data (information) to be used by both domestic and foreign producers. Because data constitute a new production factor for intermediate goods, a large extant divide in data utilization can reduce or even freeze trade. Cross-border data flows mitigate the situation and improve welfare when added to international trade. Data-light countries where data are less important in production enjoy a "latecomer's advantage" with international trade and data flows, contributing more raw data from which the data-intensive countries generate knowledge for production. Furthermore, cross-border data flows can reverse the cyclicity of working data usage after productivity shocks, whereas shocks to data privacy or import costs have opposite effects on domestic and foreign data sectors. The insights inform research and policy discussions concerning data divide, data flows, and their implications for trade liberalization, the data labor market, data protection, among others.

Intangible Capital Around the World

Frederico Belo
,
INSEAD
Yu Li
,
Shanghai Jiao Tong University
Juliana Salomao
,
University of Minnesota
Maria Ana Vitorino
,
INSEAD

Abstract

We estimate the value of intangible capital around the world through the valuation approach of a neoclassical model of investment with two heterogeneous types of capital inputs: physical capital and intangible capital. Using data on public listed firms across 77 countries, we infer the importance of intangible capital for the firm's market value in each country. We find that intangible capital accounts for over half of firms' market value globally, with significant cross-country heterogeneity. To understand the drivers of intangible capital accumulation we explore the variation in the economic and legal environment across countries. We find that economic development, intellectual property protection, and financial market factors—especially the cost of financing—significantly influence the cross-country variation in the value of intangible capital.

Tech Dollars: Technological Innovation and Exchange Rates

Qiushi Huang
,
Shanghai Jiao Tong University
Leonid Kogan
,
Massachusetts Institute of Technology
Dimitris Papanikolaou
,
Northwestern University

Abstract

"We document a strong positive correlation between U.S. innovation and the growth of the real
dollar index. Examining wealth fluctuations across countries, we observe a (re)connection between
exchange rate movements and relative changes in aggregate quantities, such as consumption
and output growth, once wealth changes are controlled for. Moreover, relative wealth changes
are positively correlated with aggregate quantities. In addition, we find that U.S. innovation is
associated with an increase in foreign capital inflows at both the aggregate and firm levels. These
observations motivate our theoretical analysis of how technological innovation affects exchange
rate movements. We introduce a minimal deviation from the standard endowment economy
model of exchange rate: in an economic boom, new firms are created, but they are randomly
distributed to a small part of the population. Our calibrated model successfully replicates key
features of the data, specifically, the joint dynamics of exchange rates, stock returns, real output
and consumption growth, and trade flows."

Discussant(s)
Itay Goldstein
,
University of Pennsylvania
Nicolas Crouzet
,
Northwestern University
Urban Jermann
,
University of Pennsylvania
JEL Classifications
  • G0 - General