Workaround for the issue: extract babel config out of package.json

.gitignore

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+node_modules

README.md

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+# Applying babel-jest transforms to files in the parent directory
+
+Working, minimalistic, project structure for applying Babel transforms to files in monorepo shared libraries. The illustrated transform is converting ES201 modules into CommonJS, which is very useful until [Jest adds native support for `.mjs` files](https://github.com/facebook/jest/issues/4842).
+
+Run `npm test` to verify that both tests pass.
+
+## Jest issue
+
+This repo also contains a reproduction for [Jest issue #8238](https://github.com/facebook/jest/issues/8238)  (transform not applied to file in parent directory) at the initial commit, [#50a49bc](https://github.com/dandv/jest-parent-dir-transform/commit/50a49bc9187b1103b5a6299517671aa8c0795912).
+
+The solution was to move the `babel` block from `package.json` into `babel.config.js`.

backend/babel.config.js

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+module.exports = {
+  plugins: [
+    'transform-es2015-modules-commonjs'
+  ],
+};

backend/package.json

@@ -20,14 +20,5 @@
     "transform": {
       "^.+\\.m?js$": "babel-jest"
     }
-  },
-  "babel": {
-    "env": {
-      "test": {
-        "plugins": [
-          "transform-es2015-modules-commonjs"
-        ]
-      }
-    }
   }
 }