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The Few Leading The Many: Foreign Affiliates and Business Cycle Comovement

Farid Toubal, Joern Kleinert () and Julien Martin

No 9129, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper uses micro-data on balance sheets, trade, and the nationality of ownership of firms in France to investigate the effect of foreign multinationals on business cycle comovement. We first show that foreign affiliates, which represent a tiny fraction of all firms, are responsible for a high share of employment, value added, and trade both at the national and at the regional levels. We also show that the distribution of foreign affiliates across French regions differs with the nationality of the parent. We then show that foreign affiliates increase the comovement of activities between their region of location and their country of ownership. We also find that intra-firm trade in intermediate inputs is a significant channel of influence of business cycle comovement. These findings suggest that the international transmission of shocks is partly due to linkages between affiliates and their foreign parents, and that a few multinational companies drive a non-negligible part of business cycle comovement.

Keywords: Granularity; Business cycles; Multinational firms; Intra-firm trade (search for similar items in EconPapers)
JEL-codes: F12 F23 F4 F41 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-bec and nep-ifn
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Related works:
Journal Article: The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement (2015) Downloads
Working Paper: The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement (2015)
Working Paper: The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement (2015)
Working Paper: The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement (2012) Downloads
Working Paper: The few leading the many: foreign affiliates and business cycle comovement (2012) Downloads
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