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The Role of Foreign Direct Investment in International Capital Flows

In: International Capital Flows

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  • Robert E. Lipsey
  • Robert C. Feenstra
  • Carl H. Hahn
  • George N. Hatsopoulos

Abstract

Direct investment has accounted for about a quarter of total international capital outflows in the 1990s and appears to have grown, relative to other forms of international investment, since the 1970s. The United States was by far the major source of direct investment outflows in the early 1970s, but Europe caught up to the United States in the 1980s and Japan almost did, before fading in the 1990s. The United States shifted from being the largest net supplier of direct investment to absorbing much of the world's supply, especially in the late 1980s, and then reverted to its earlier net supplier role. Direct Investment flows have been the least volatile source of international investment for most countries, the chief exception being the United States, which has flipped back and forth from dominant net supplier to dominant net recipient, and back to dominant net supplier. Particularly for developing countries, direct investment has been the most dependable source of foreign investment.
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Suggested Citation

  • Robert E. Lipsey & Robert C. Feenstra & Carl H. Hahn & George N. Hatsopoulos, 1999. "The Role of Foreign Direct Investment in International Capital Flows," NBER Chapters,in: International Capital Flows, pages 307-362 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:9801
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    References listed on IDEAS

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    1. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
    2. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, pages 447-465.
    3. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1191-1217.
    4. Edward M. Graham, 1996. "Global Corporations and National Governments," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 54.
    5. D.N. Saxena, 1989. "Foreign Direct Investment," Foreign Trade Review, , vol. 24(1), pages 76-97, April.
    6. Goodman, John B. & Spar, Debora & Yoffie, David B., 1996. "Foreign direct investment and the demand for protection in the United States," International Organization, Cambridge University Press, vol. 50(04), pages 565-591, September.
    7. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
    8. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, pages 186-190.
    9. Elias Dinopoulos, 1992. "Quid Pro Quo Foreign Investment And Vers: A Nash Bargaining Approach," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 43-60, March.
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