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The impact of restrictions on FDI

Author

Listed:
  • Marco Albori

    (Bank of Italy)

  • Flavia Corneli

    (Bank of Italy)

  • Valerio Nispi Landi

    (Bank of Italy)

  • Alessandro Schiavone

    (Bank of Italy)

Abstract

In the 1990s and 2000s, most countries – including many emerging economies – lifted some barriers to FDI together with trade liberalization; this trend has slowed since the global financial crisis. In this paper, we assess the impact of FDI restrictions on gross inflows by exploiting the sectoral dimension of FDI flows and of the Regulatory Restrictiveness Index (RRI) reported in the OECD databases. In a sample of 17 OECD countries and 23 sectors covering the years 2012-2018, we find that FDI restrictions significantly dampen foreign investments in the manufacturing and service sectors, particularly when they limit foreign equity acquisitions. We also take into account restrictions motivated by national security considerations, which are not scored in the RRI; similarly to other restrictions involving screening schemes, they have not had a significant impact on the size of FDI flows so far.

Suggested Citation

  • Marco Albori & Flavia Corneli & Valerio Nispi Landi & Alessandro Schiavone, 2021. "The impact of restrictions on FDI," Questioni di Economia e Finanza (Occasional Papers) 656, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_656_21
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    More about this item

    Keywords

    foreign direct investment; capital controls; national security;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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