The International Transmission of Negative Shocks Through Multinational Companies: The Real Economy Channel
Charles A. Dice Center Working Paper No. 2017-11
82 Pages Posted: 3 May 2017 Last revised: 15 Feb 2019
Date Written: February 12, 2019
We study how non-financial multinational companies transmit negative shocks from their subsidiaries located in countries experiencing a negative shock to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a country experiencing a negative shock. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in the countries of the affected subsidiaries.
Keywords: Multinational Companies, MNC, International Contagion, International Comovement, International Spillovers, International Contagion, Transmission of Shocks
JEL Classification: G01, G30, G31, F23, F42
Suggested Citation: Suggested Citation