Foreign Direct Investment in Times of Crisis

19 Pages Posted: 29 Jan 2011

See all articles by Lauge N. Skovgaard Poulsen

Lauge N. Skovgaard Poulsen

University College London

Gary Clyde Hufbauer

Peter G. Peterson Institute for International Economics; Institute for International Economics

Date Written: January 25, 2011

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.

Keywords: Foreign Direct Investment, Investment Policy, Trade Policy, Protectionism, International Investment Agreements, Economic Crises, Financial Crises

JEL Classification: F13, F21, F23

Suggested Citation

Skovgaard Poulsen, Lauge N. and Hufbauer, Gary Clyde, Foreign Direct Investment in Times of Crisis (January 25, 2011). Peterson Institute for International Economics Working Paper No. 11-3, Available at SSRN: https://ssrn.com/abstract=1747969 or http://dx.doi.org/10.2139/ssrn.1747969

Lauge N. Skovgaard Poulsen (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Gary Clyde Hufbauer

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
332
Abstract Views
1,565
rank
99,170
PlumX Metrics