The Micro Origins of International Business Cycle Comovement

Andrei Levchenko, Julian di Giovanni and Isabelle Mejean

No 11036, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates the role of individual firms in international business cycle comovement using data covering the universe of French firm-level value added, bilateral imports and exports, and cross-border ownership over the period 1993-2007. At the micro level, controlling for firm and country effects, trade in goods with a particular foreign country is associated with a significantly higher correlation between a firm and that foreign country. In addition, foreign multinational affiliates operating in France are significantly more correlated with the source economy. The impact of direct trade and multinational linkages on comovement at the micro level has significant macro implications. Because internationally connected firms are systematically larger than non-internationally connected firms, the firms directly linked to foreign countries represent only 8% of all firms, but 56% of all value added, and account for 75% of the observed aggregate comovement. Without those linkages the correlation between France and foreign countries would fall by about 0.091, or one-third of the observed average business cycle correlation of 0.29 in our sample of partner countries. These results are evidence of transmission of business cycle shocks through direct trade and multinational ownership linkages at the firm level.

Keywords: Comovement; Firm-level shocks; International trade; Large firms (search for similar items in EconPapers)
JEL-codes: F44 F61 F62 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-bec, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: The Micro Origins of International Business-Cycle Comovement (2018)
Working Paper: The Micro Origins of International Business-Cycle Comovement (2018)
Working Paper: The Micro Origins of International Business Cycle Comovement (2017)
Working Paper: The micro origins of international business cycle comovement (2017)
Working Paper: The Micro Origins of International Business Cycle Comovement (2016)
Working Paper: The Micro Origins of International Business Cycle Comovement (2016)
Working Paper: The Micro Origins of International Business Cycle Comovement (2015)
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