Title

Foreign Direct Investment Outflows and Business-Cycle Fluctuations

Document Type

Article

Publication Date

2-2007

Source Publication

Review of International Economics

Source ISSN

0965-7576

Abstract

This paper investigates business-cycle effects for a country’s foreign direct investment (FDI) outflows. Ordinary least squares and panel regressions show that volatility in economic growth has a negative and significant impact on FDI outflows. Furthermore, we find different types of shocks have asymmetric impacts on FDI outflows. In other words, fluctuations of the same magnitude in a boom and a recession have different effects on FDI outflows. This relationship is more evident in OECD countries. We also include exchange rate volatility, lagged business-cycle measure, and control for potential endogeneity problems as robustness checks. Our findings are robust across different specifications.

Comments

Review of International Economics, Vol. 15, No. 1 (February 2007): 146-163. DOI.