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Business Cycles and FDI: Evidence from German Sectoral Data

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  • Claudia M. Buch
  • Alexander Lipponer

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.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1245.

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Length: 39 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:kie:kieliw:1245

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Keywords: Business cycles; multinational activity; FDI;

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References

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Cited by:
  1. Silvio Contessi, 2010. "How does multinational production change international comovement?," Working Papers 2010-041, Federal Reserve Bank of St. Louis.
  2. Cavallari, Lilia & D'Addona, Stefano, 2012. "Business cycle determinants of US foreign direct investments," MPRA Paper 43616, University Library of Munich, Germany.

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