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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
The few leading the many: foreign affiliates and business cycle comovement
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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Jörn Kleinert & Julien Martin & Farid Toubal, The few leading the many: foreign affiliates and business cycle comovement, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 116, 2012.
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Note: Published as: 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): 134-159.
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