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International outsourcing over the business cycle: some intuition for Germany, the Czech Republic and Slovakia

Keywords: international outsourcing , foreign direct investment , business cycles , Central and Eastern European countries , European integration

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Abstract:

In this paper, we assess the extent to which multinational firms – in the first instance, the German ones – may adjust their international outsourcing over the business cycle in the Czech Republic and Slovakia. For that purpose, we have used monthly data of production for the manufacturing sector as a whole and some of its sub-sectors, since 2000 onwards. Our econometrical estimates suggest that there would be an asymmetry in the international outsourcing across the states of the economy, meaning that multinationals firms would be engaged differently in outsourcing activities, depending on whether bad or good economic times occur. Yet, such an asymmetry is found increasing over the time for German and French multinationals operating in the transport equipment sector of Slovakia. Another conclusion is that international outsourcing made by multinational firms in Slovakia may account for a portion of its large business cycles volatility.

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