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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 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 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 find that intra-firm trade in intermediate inputs is a significant channel of influence of business cycle comovement. 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.

Suggested Citation

  • Jörn Kleinert & Julien Martin & Farid Toubal, 2012. "The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement," Working Papers 2012-18, CEPII research center.
  • Handle: RePEc:cii:cepidt:2012-18
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    Citations

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    Cited by:

    1. Javier Cravino & Andrei A. Levchenko, 2017. "Multinational Firms and International Business Cycle Transmission," The Quarterly Journal of Economics, Oxford University Press, vol. 132(2), pages 921-962.
    2. Nicholas Sly & Caroline Weber, 2013. "International Fiscal Policy Coordination and GDP Comovement," CESifo Working Paper Series 4358, CESifo Group Munich.
    3. Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yeşin, 2017. "Merchanting and Current Account Balances," The World Economy, Wiley Blackwell, vol. 40(1), pages 140-167, January.
    4. Blonigen, Bruce A. & Piger, Jeremy & Sly, Nicholas, 2014. "Comovement in GDP trends and cycles among trading partners," Journal of International Economics, Elsevier, vol. 94(2), pages 239-247.
    5. Joachim Wagner & John P. Weche Gelübcke, 2016. "Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises during the Crisis 2008–2010," World Scientific Book Chapters,in: Microeconometrics of International Trade, chapter 11, pages 369-397 World Scientific Publishing Co. Pte. Ltd..
    6. repec:eee:ecolet:v:163:y:2018:i:c:p:95-97 is not listed on IDEAS
    7. repec:jes:wpaper:y:2012:v:4:p:668-692 is not listed on IDEAS
    8. 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(4), pages 668-692, December.
    9. Claudia Busl & Marcus Kappler, 2013. "Does Foreign Direct Investment Synchronise Business Cycles? Results from a Panel Approach," WWWforEurope Working Papers series 23, WWWforEurope.
    10. repec:bla:reviec:v:25:y:2017:i:2:p:292-319 is not listed on IDEAS
    11. Gabor Bekes & Gianmarco I.P. Ottaviano, 2015. "Micro-founded measurement of regional competitiveness in Europe," IEHAS Discussion Papers 1525, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    12. repec:hal:journl:dumas-00910194 is not listed on IDEAS
    13. Natalia Ramondo & Felix Tintelnot & Andreas Moxnes & Anna Gumpert, 2016. "Multinational Firms and Export Dynamics," 2016 Meeting Papers 124, Society for Economic Dynamics.
    14. Paniagua, Jordi & Figueiredo, Erik & Sapena, Juan, 2015. "Quantile regression for the FDI gravity equation," Journal of Business Research, Elsevier, vol. 68(7), pages 1512-1518.
    15. Anna Gumpert & Andreas Moxnes & Natalia Ramondo & Felix Tintelnot, 2017. "The Life-Cycle Dynamics of Exporters and Multinational Firms," CESifo Working Paper Series 6758, CESifo Group Munich.
    16. Nicola Cortinovis & Riccardo Crescenzi & Frank van Oort, 2018. "Multinational enterprises, industrial relatedness and employment in European regions," Papers in Evolutionary Economic Geography (PEEG) 1802, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2018.

    More about this item

    Keywords

    Granularity; Business Cycles; Multinational Firms; Intra-firm Trade;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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