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The Importance of Multinational Companies for Global Economic Linkages

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  • W.Jos Jansen
  • Ad C.J. Stokman

Abstract

We investigate to what extent the expansion of FDI and the internationalization of production can be related to the recent phenomenon of more synchronized business cycles. We first focus on the relationship between bilateral FDI positions and cross-country output correlations in the period 1982-2001. We find that countries that have comparatively intensive FDI relations exhibit a greater degree of output comovement, and that this positive association seems to become stronger over time. We then present evidence that international rent sharing might be an important aspect of global economic linkages. German, French, Belgian and Dutch labour markets are significantly affected by profits of foreign-based multinationals, with employment being more sensitive than wages. By contrast, US and UK labour market conditions do not, or hardly, react to changes in foreign profitability.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2002-22.

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Date of creation: Jan 2003
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Handle: RePEc:dnb:mebser:2002-22

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Keywords: foreign direct investment; rent sharing; international linkages; spillovers;

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Cited by:
  1. W.Jos Jansen & Ad C.J.Stokman, 2003. "Foreign Direct Investment and International Business Cycle Comovement," MEB Series (discontinued) 2003-10, Netherlands Central Bank, Monetary and Economic Policy Department.

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