The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement
American Economic Journal: Macroeconomics
vol. 7,
no. 4, October 2015
(pp. 134-59)
Abstract
This paper argues that the correlation of business cycles across countries is largely due to linkages between multinational firms and their foreign affiliates. There are very few foreign affiliates in France, but they contribute considerably to aggregate economic activities. We exploit the heterogeneity in the presence and origin of foreign affiliates across French regions to identify their impact on comovement. We find a positive impact of foreign affiliates' presence on the comovement of business cycles between their regions of location and their countries of origin. This effect is not primarily driven by foreign affiliates' trade with their countries of origin. (JEL E32, F14, F23, F44)Citation
Kleinert, Jörn, Julien Martin, and Farid Toubal. 2015. "The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement." American Economic Journal: Macroeconomics, 7 (4): 134-59. DOI: 10.1257/mac.20130234Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- F14 Empirical Studies of Trade
- F23 Multinational Firms; International Business
- F44 International Business Cycles
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