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Foreign Direct Investment in Times of Crisis

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Author Info

  • Lauge Skovgaard Poulsen

    ()
    (London School of Economics)

  • Gary Clyde Hufbauer

    ()
    (Peterson Institute for International Economics)

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.

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP11-3.

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Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iie:wpaper:wp11-3

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Related research

Keywords: foreign direct investment; investment policy; trade policy; protectionism; international investment agreements; economic crises; financial crises;

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Cited by:
  1. Vintila Denisia Mariana, 2011. "Foreign Direct Investments During Financial Crises," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 41-45, December.
  2. United Nations ESCAP, 2012. "Foreign Direct Investment," STUDIES IN TRADE AND INVESTMENT, in: Asia-Pacific Trade and Investment Report 2012: Recent Trends and Developments, chapter 3, pages 47-67 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  3. DORNEAN Adina & OANEA Dumitru-Cristian, 2013. "Foreign Direct Investment And Post Crisis Economic Growth. Evidence From European Union," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 65(6), pages 46-60.

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