Business Cycles and FDI: Evidence from German Sectoral Data

48 Pages Posted: 8 Jun 2016

Date Written: 2005

Abstract

Globalization has effected business cycle developments in OECD countries and has increased activities of firms across national borders. This paper analyzes whether these two developments are linked. We use a new firm-level dataset on the foreign activities of German firms to test whether foreign activities are affected by business cycle developments. We aggregate the data by the sector of the reporting firm, the sector of the foreign affiliate, and the host country. Data are annual and cover the period 1989-2002. We find that German outward FDI increases in response to positive cyclical developments abroad and in response to a real depreciation of the domestic currency.

Keywords: Business cycles, multinational activity, FDI

JEL Classification: F23, E3

Suggested Citation

Buch, Claudia M. and Lipponer, Alexander, Business Cycles and FDI: Evidence from German Sectoral Data (2005). Bundesbank Series 1 Discussion Paper No. 2005,09, Available at SSRN: https://ssrn.com/abstract=2785096

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Alexander Lipponer

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

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