Foreign Direct Investment Outflows and Business-Cycle Fluctuations
Format of Original
Review of International Economics
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.
Wang, Miao and Wong, M. C. Sunny, "Foreign Direct Investment Outflows and Business-Cycle Fluctuations" (2007). Economics Faculty Research and Publications. 109.