Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

The Role of Foreign Affiliates in Explaining Transmission of Shocks

Vol.28, No.2, June , 135–153


English Version |  Korean Version
  •   (Department of Economics, Kangwon National University)

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Abstract  

This paper investigates whether the linkages between foreign affiliates in Korea and their parent companies is a key factor in explaining transmission of foreign shocks from 2006 to 2015 using firm-level data. We try to answer this question by empirically examining the relationship between the performance of foreign affiliates located in Korean and their parent companies. The empirical results show that growth in parent country (the location of parent company) has negative impact on the growth in foreign affiliates in Korea rather than contribute to increase in foreign affiliates performance. This result means that negative foreign shocks may not contribute to decrease in GDP growth rate or does not have negative impact on domestic business cycle. We interpret this result as an evidence that the linkages between foreign affiliates in Korea and their parent companies may not be a key factor in explaining transmission of foreign (oriented) shocks in case of Korea.


Keywords
   Foreign Affiliates; Business Cycle

JEL classification codes
   E3, F0
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