Foreign Direct Investment Outflows in Business-Cycle Fluctuations

Abstract:     
This paper investigates business-cycle affects for a country's FDI outflows. OLS 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 problem as robustness checks. Our findings are robust across different specifications.

Number of Pages in PDF File: 33

Keywords: Foreign Direct Investments, FDI, Business Cycles, Volatility, Determinants, Economic Growth

JEL Classification: E32, F21, F23

working papers series