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Tracing the International Transmission of a Crisis Through Multinational Firms

Author

Listed:
  • Marcus Biermann
  • Kilian Huber

Abstract

We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were "Darwinist" with respect to international affiliates but "Socialist" in the home country, that internal capital markets transmitted the credit shock more strongly than a non-financial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.

Suggested Citation

  • Marcus Biermann & Kilian Huber, 2023. "Tracing the International Transmission of a Crisis Through Multinational Firms," NBER Working Papers 31061, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31061
    Note: CF EFG IFM IO ITI LS ME PR
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    Cited by:

    1. Kochen, Federico, 2025. "Equity financing in a banking crisis: evidence from private firms," Working Paper Series 3008, European Central Bank.
    2. Basco, Sergi & Felice, Giulia & Merlevede, Bruno & Mestieri, Martí, 2024. "Financial crises and the global supply network: Evidence from multinational enterprises," Journal of International Economics, Elsevier, vol. 152(C).
    3. Sarah Clifford & Jakob Miethe, 2025. "The Multinational Capital Advantage," CESifo Working Paper Series 12244, CESifo.
    4. Boddin Dominik & Kruse Hendrik W. & Merkle Hariolf & Walter Susanne & Zapf Benedikt, 2025. "Combined International Trade and Investment Data “CITID” – A New Innovative and Comprehensive Data Landscape for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 245(3), pages 339-350.
    5. Shi, Lifan & Li, Xing & Chen, Xi, 2025. "How does FDI affect enterprises' OFDI through trade networks?," International Review of Economics & Finance, Elsevier, vol. 97(C).
    6. D’Avino, Carmela, 2024. "Global banks and the picking order in internal capital markets: Do locational activity patterns matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 97(C).
    7. Aycan Katitas & Sonal Pandya, 2024. "Investment incentives attract foreign direct investment: evidence from the great recession," Public Choice, Springer, vol. 200(1), pages 323-345, July.
    8. Kujtim Avdiu & Jochen Güntner & Karin Mayr-Dorn & Esther Segalla, 2025. "Multinational firms, internal borrowing, and domestic bank loans," Economics working papers 2025-13, Department of Economics, Johannes Kepler University Linz, Austria.

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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