We study whether multinational corporations transmit the effects of a localized banking crisis to countries all over the world. We identify an exogenous shock to the credit supply of multinational parent corporations located in Germany. The shock to parents caused a reduction in the sales of their international affiliates for three years. We use unique data on linkages between parents and affiliates to study the transmission mechanism from parents’ credit supply to affiliates’ sales. Both financial constraints and intrafirm trade played a role: Parents withdrew equity from their affiliates, required more long-term lending from the affiliates, and traded less with their affiliates. The results improve our understanding of the internal operations of multinational firms and suggest that multinationals contribute to global business cycle synchronization.
What is the effect of trade on the size distribution of firms? I collected historical data between 1882 and 1907 from the German Empire to address this question. I can then match three data sets according to the same geographic boundaries: industry census data, railway and waterway trade data. The key findings are that trade integration impacts the firm size distribution heterogeneously across five size categories. I find evidence of a hierarchical and stark shift in employment and firm share from the smallest towards larger firm size categories. A “Bartik” instrument is proposed to argue that the correlations described are indeed causal. I provide evidence for a fall in transport costs and technology adoption as mechanisms to explain the stylized facts observed in the data.
Work in Progress and Future Research
The Role of Management Practices in Acquisitions and FDI
International Trade and Business Cycle Comovement: Causal Evidence
Financing Service Trade (with Peter Eppinger and Karol Paludkiewicz)