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

46 Pages Posted: 28 Sep 2012

See all articles by Joern Kleinert

Joern Kleinert

University of Tuebingen - Department of Economics

Julien Martin

affiliation not provided to SSRN

Farid Toubal

Ecole Normale Superieure de Cachan (ENS) - Departement of Economics ans Management; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Date Written: September 2012

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: business cycles, granularity, intra-firm trade, multinational firms

JEL Classification: F12, F23, F4, F41

Suggested Citation

Kleinert, Joern and Martin, Julien and Toubal, Farid, The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement (September 2012). CEPR Discussion Paper No. DP9129. Available at SSRN: https://ssrn.com/abstract=2153570

Joern Kleinert (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

Julien Martin

affiliation not provided to SSRN ( email )

Farid Toubal

Ecole Normale Superieure de Cachan (ENS) - Departement of Economics ans Management ( email )

France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
328
PlumX Metrics