The Cyclical Nature of North-South FDI Flows
AbstractIn this paper, we examine how the business and interest rate cycles in developed countries affect FDI to developing countries. After aggregating flows into three big source areas (the U.S., Europe and Japan), we find FDI flows to be countercyclical with respect to both output and interest rate cycles in the first two, whereas in Japan they display either no cyclical behavior or mild procyclical behavior. This finding is consistent with the fact that FDI outflows and local investment tend to move in opposite directions during the cycles in the U.S. and Europe, reflecting investors' arbitrage among different investment opportunities. In sum, and contrary to what is usually claimed, we conclude that recessions in industrial countries are likely to increase FDI flows, particularly to those countries with close ties with the U.S. and Europe.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Inter-American Development Bank in its series IDB Publications with number 6502.
Date of creation: Jan 2003
Date of revision:
Integration & Trade; WP-479;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luis Daniel Martinez).
If references are entirely missing, you can add them using this form.