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The few leading the many: foreign affiliates and business cycle comovement

Joern Kleinert (), Julien Martin () and Farid Toubal

No 116, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper uses microdata 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 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. Moreover, we find greater comovement among French regions that have a more similar composition in terms of the nationality of foreign affiliates. These findings suggest that a non-negligible part of business cycle comovement is driven by a few multinational companies, and that the international transmission of shocks is partly due to linkages between affiliates and their foreign parents.

JEL-codes: F12 F23 F4 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-mac
Date: 2012
Note: Published as: Kleinert, Jörn, Julien Martin and Farid Toubal (2015), "The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement," American Economic Journal: Macroeconomics 7 (4): 134-159.
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http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0116.pdf (application/pdf)

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 (2012) Downloads
Working Paper: The Few Leading The Many: Foreign Affiliates and Business Cycle Comovement (2012) Downloads
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