COVID-19 Stringency Measures and Foreign Investment: An Early Assessment

33 Pages Posted: 16 Feb 2021 Last revised: 10 Mar 2021

See all articles by Maela Giofré

Maela Giofré

University of Turin - Department of Economics and Statistics; CeRP-CCA; Netspar

Date Written: August 14, 2020


This paper investigates the evolution of foreign investment in the immediate aftermath of the implementation of COVID-19 government stringency measures. The average stringency index is not correlated with inward investment positions. However, after removing country fixed-effect and controlling for the severity of the outbreak spread, the within-country standard deviation of the stringency index is positively and significantly correlated with inward portfolio investments at the end of the first quarter of 2020. At the end of the second quarter, the same dispersion measure is instead not associated with a significant change in inward investment. We interpret this evidence as follows. Foreign portfolio investments, typically more volatile and reactive than foreign direct ones, are more responsive to governments' prompt reactions than to gradual ones at the end of the first quarter, thus suggesting that the former policies are perceived as a more serious commitment to stem the spread of COVID-19. In the second quarter, instead, the standard deviation of the index captures the abrupt retreats of the containment measures, together with the timeliness in the adoption of policies, thus becoming less informative for foreign investors.

Keywords: International Investments, COVID-19, stringency index

JEL Classification: G11, G15, G30

Suggested Citation

Giofré, Maela, COVID-19 Stringency Measures and Foreign Investment: An Early Assessment (August 14, 2020). Available at SSRN: or

Maela Giofré (Contact Author)

University of Turin - Department of Economics and Statistics ( email )

Lungo Dora Siena 100/A
Torino, Turin - Piedmont 10153

CeRP-CCA ( email )

Via Real Collegio 30
Moncalieri (TO), Turin 10024

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE

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