Adam, Antonis and Tsarsitalidou, Sofia (2023) Be my guest: the effect of foreign policy visits to the USA on FDI. Review of World Economics. ISSN 1610-2878
Text (Be my guest. The effect of foreign policy visits to the USA on FDI)
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Abstract
We examine whether a country leader’s diplomatic visit to the USA affects the Foreign Direct Investment inflow. The literature so far has found inconclusive results regarding diplomatic relations' effect on international flows. We use a dynamic Inverse Probability Weighting Regression Adjustment framework to examine this relationship and estimate the causal effect of foreign visits. Our results indicate that a visit to the US increases the country’s total FDI inflows by up to one percentage point per annum, with a cumulative effect reaching 2.5 percentage points six years after the visit. However, this is a short-run effect as it disappears in the subsequent years. Furthermore, our first-stage results shed light on the profile of the leaders that visit the US. Our findings are consistent with the view that foreign visits act as signals to investors regarding the country’s political risk.
Item Type: | Article |
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Additional Information: | © 2023, The Author(s). |
Divisions: | LSE Health |
Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
JEL classification: | F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements H - Public Economics > H8 - Miscellaneous Issues > H80 - General |
Date Deposited: | 08 Jun 2023 10:15 |
Last Modified: | 07 Oct 2024 08:00 |
URI: | http://eprints.lse.ac.uk/id/eprint/119368 |
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