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Business Cycles and FDI: Evidence from German Sectoral Data

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Author Info
Claudia M. Buch
Alexander Lipponer

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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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Publisher 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
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Handle: RePEc:kie:kieliw:1245

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Related research
Keywords: Business cycles multinational activity FDI

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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