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Foreign direct investment in times of crisis

Poulsen, Lauge N. Skovgaard and Hufbauer, Gary Clyde (2011) Foreign direct investment in times of crisis. Peterson Institute for International Economics Working Paper, 11-3. The Peterson Institute for International Economics, Washington, D.C, USA.

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Identification Number: 11-3

Abstract

This paper compares the current foreign direct investment (FDI) recession with FDI responses to past economic crises. The authors find that although developed country outflows have taken an equally big hit as major developed countries have after past crises, outflows seem to be bouncing back more slowly this time. By contrast with the overall decline in recent years, inflows to emerging markets often remained stable during their past economic crises. Both patterns indicate that the global scale of the current crisis has led to a greater FDI response than after individual country crises in the past. Compared with global economic downturns since the 1970s, the current FDI recession has also been greater in magnitude. The exception is the FDI plunge in the early 2000s, despite the much smaller economic crisis at the time. The authors conclude by recommending that policymakers not just further liberalize FDI regimes—as they find was the typical pattern during earlier crises—but rather use the downturn to rethink their FDI policies with an enhanced focus on "sustainable FDI" promotion.

Item Type: Monograph (Working Paper)
Official URL: http://www.iie.com/
Additional Information: © 2011 The Authors
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Sets: Departments > International Relations
Collections > Economists Online
Date Deposited: 26 Sep 2011 12:44
Last Modified: 11 Oct 2011 10:15
URI: http://eprints.lse.ac.uk/id/eprint/38450

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