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

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  • Jörn Kleinert
  • Julien Martin
  • Farid Toubal

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.

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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 116.

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Date of creation: 2012
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Handle: RePEc:fip:feddgw:116

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Cited by:
  1. Nicholas Sly & Caroline Weber, 2013. "International Fiscal Policy Coordination and GDP Comovement," CESifo Working Paper Series 4358, CESifo Group Munich.
  2. Joachim Wagner & John P. Weche Geluebcke, 2013. "Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises during the Crisis 2008-2010," Working Paper Series in Economics 288, University of Lüneburg, Institute of Economics.
  3. Myriam Alejandra Gómez Cárdenas, 2013. "Volatility in the Mexican offshoring industry," Post-Print dumas-00910194, HAL.
  4. Sebastian Florian Enea & Silvia Palaºcã, 2012. "Globalization Versus Segregation - Business Cycles Synchronization In Europe," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 668-692, December.
  5. Bruce A. Blonigen & Jeremy Piger & Nicholas Sly, 2012. "Comovement in GDP Trends and Cycles Among Trading Partners," NBER Working Papers 18032, National Bureau of Economic Research, Inc.
  6. Claudia Busl & Marcus Kappler, 2013. "Does Foreign Direct Investment Synchronise Business Cycles? Results from a Panel Approach," WWWforEurope Working Papers series 23, WWWforEurope.

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