Tracing the International Transmission of a Crisis through Multinational Firms

Marcus Biermann and Kilian Huber

No 20336, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were “Darwinist†with respect to international affiliates but “Socialist†in the home country, that internal capital markets transmitted the credit shock more strongly than a nonfinancial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.

Keywords: Multinational firms; Banking crisis; Internal capital markets (search for similar items in EconPapers)
JEL-codes: D2 E44 F2 F3 G01 G2 (search for similar items in EconPapers)
Date: 2025-06
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