IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2401.03096.html

The Effects of COVID-19 and the Russia-Ukraine War on Inward Foreign Direct Investment

Author

Listed:
  • MS Hosen
  • SM Hossain
  • MN Mia
  • MR Chowdhury

Abstract

Inward Foreign Direct Investment (IFDI) into Europe and Asian developing countries like Bangladesh is experimentally examined in this study. IFDI in emerging markets has been boosted by global investment and inflow influenced by resource availability and public policy. The economic policy uncertainty on IFDI in 13 countries is explored at a time when the crisis between Russia and Ukraine war is having a global impact. Microeconomic factors affected Gross Domestic Product (GDP) growth, inflation, interest rates, and the currency rate fluctuated with IFDI, which mostly shocked during COVID-19 and the Russia-Ukraine war. With data from the World Bank and the United Nations Conference on Trade and Development (UNCTAD) database, we compile a panel dataset covering 2018-2022. The researchers used a mixture of panel and linear regression analysis using a random effect model. Our findings show that the impact of global rates hurts IFDI in 13 selected countries. There is a correlation between a country's ability to enforce contracts and the amount of Inward FDI it receives. Using the top 13 hosts of incoming FDI flows COVID-19 and Russia-Ukraine wartime series analysis gives valuable information for policymakers in the remaining countries chosen to attract IFDI inflows.

Suggested Citation

  • MS Hosen & SM Hossain & MN Mia & MR Chowdhury, 2024. "The Effects of COVID-19 and the Russia-Ukraine War on Inward Foreign Direct Investment," Papers 2401.03096, arXiv.org.
    • Handle: RePEc:arx:papers:2401.03096
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2401.03096
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chao-Hsi Huang & Kai-Fang Teng & Pan-Long Tsai, 2010. "Inward and outward foreign direct investment and poverty: East Asia vs. Latin America," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(4), pages 763-779, December.
    2. Mojtaba Hajian Heidary, 2022. "A system dynamics model of the impact of COVID-19 pandemic and foreign direct investment in the global supply chain," Future Business Journal, Springer, vol. 8(1), pages 1-9, December.
    3. Amendolagine, Vito & Presbitero, Andrea F. & Rabellotti, Roberta & Sanfilippo, Marco, 2019. "Local sourcing in developing countries: The role of foreign direct investments and global value chains," World Development, Elsevier, vol. 113(C), pages 73-88.
    4. Boateng, Agyenim & Hua, Xiuping & Nisar, Shaista & Wu, Junjie, 2015. "Examining the determinants of inward FDI: Evidence from Norway," Economic Modelling, Elsevier, vol. 47(C), pages 118-127.
    5. Manop Udomkerdmongkol & Oliver Morrissey & Holger Görg, 2009. "Exchange Rates and Outward Foreign Direct Investment: US FDI in Emerging Economies," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 754-764, November.
    6. Fred Ramb & Alfons J. Weichenrieder, 2005. "Taxes and the Financial Structure of German Inward FDI," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 670-692, December.
    7. Adriana Burlea‐Schiopoiu & Simina Brostescu & Liviu Popescu, 2023. "The impact of foreign direct investment on the economic development of emerging countries of the European Union," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2148-2177, April.
    8. Klein, Michael W. & Rosengren, Eric, 1994. "The real exchange rate and foreign direct investment in the United States : Relative wealth vs. relative wage effects," Journal of International Economics, Elsevier, vol. 36(3-4), pages 373-389, May.
    9. David Bailey & Nigel Driffield & Erika Kispeter, 2019. "Brexit, foreign investment and employment: some implications for industrial policy?," Contemporary Social Science, Taylor & Francis Journals, vol. 14(2), pages 174-188, April.
    10. Kottaridi, Constantina & Louloudi, Konstantina & Karkalakos, Sotiris, 2019. "Human capital, skills and competencies: Varying effects on inward FDI in the EU context," International Business Review, Elsevier, vol. 28(2), pages 375-390.
    11. Nurmakhanova, Mira & Elheddad, Mohamed & Alfar, Abdelrahman J.K. & Egbulonu, Alloysius & Zoynul Abedin, Mohammad, 2023. "Does natural resource curse in finance exist in Africa? Evidence from spatial techniques," Resources Policy, Elsevier, vol. 80(C).
    12. Arup Kumar Chattopadhyay & Debdas Rakshit & Payel Chatterjee & Ananya Paul, 2022. "Trends and Determinants of FDI with Implications of COVID-19 in BRICS," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(1), pages 43-59, January.
    13. Imad A. Moosa & Ebrahim Merza, 2022. "The effect of COVID-19 on foreign direct investment inflows: stylised facts and some explanations," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    14. Izzeldin, Marwan & Muradoğlu, Yaz Gülnur & Pappas, Vasileios & Petropoulou, Athina & Sivaprasad, Sheeja, 2023. "The impact of the Russian-Ukrainian war on global financial markets," International Review of Financial Analysis, Elsevier, vol. 87(C).
    15. Robert Grosse & Len J Trevino, 1996. "Foreign Direct Investment in the United States: An Analysis by Country of Origin," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(1), pages 139-155, March.
    16. Uddin, Moshfique & Chowdhury, Anup & Zafar, Sheeba & Shafique, Sujana & Liu, Jia, 2019. "Institutional determinants of inward FDI: Evidence from Pakistan," International Business Review, Elsevier, vol. 28(2), pages 344-358.
    17. Albulescu, Claudiu Tiberiu & Ionescu, Adrian Marius, 2018. "The long-run impact of monetary policy uncertainty and banking stability on inward FDI in EU countries," Research in International Business and Finance, Elsevier, vol. 45(C), pages 72-81.
    18. Jude, Cristina & Silaghi, Monica Ioana Pop, 2016. "Employment effects of foreign direct investment: New evidence from Central and Eastern European countries," International Economics, Elsevier, vol. 145(C), pages 32-49.
    19. Abdur Chowdhury & George Mavrotas, 2006. "FDI and Growth: What Causes What?," The World Economy, Wiley Blackwell, vol. 29(1), pages 9-19, January.
    20. Nigel Driffield & Michail Karoglou, 2019. "Brexit and foreign investment in the UK," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 182(2), pages 559-582, February.
    21. Roger Strange, 2020. "The 2020 Covid-19 pandemic and global value chains," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(3), pages 455-465, September.
    22. Maite Alguacil & Ana Cuadros & Vicente Orts, 2008. "EU Enlargement and Inward FDI," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 594-604, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ronald B. Davies & Rodolphe Desbordes, 2018. "Export Processing Zones and the Composition of Greenfield FDI," Working Papers 201807, School of Economics, University College Dublin.
    2. Shi, Jiao, 2019. "Vertical FDI and exchange rates over the business cycle: The welfare implications of openness to FDI," Journal of Development Economics, Elsevier, vol. 138(C), pages 274-293.
    3. Pick-Soon Ling & Ming K. Lim & Ming-Lang Tseng, 2020. "Assessing Sustainable Foreign Direct Investment Performance in Malaysia: A Comparison on Policy Makers and Investor Perceptions," Sustainability, MDPI, vol. 12(20), pages 1-38, October.
    4. Nathapornpan Piyaareekul Uttama & Rapipong Promnart, 2022. "Shadow economy and the efficiency of FDI inflow: the case of ASEAN economies," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 23(2), pages 136-155.
    5. Shahriyar Mukhtarov & Mustafa Mohammad Alalawneh & Mayis Azizov & Farid Jabiyev, 2020. "The Impact of Monetary Policy and Tax Revenues on Foreign Direct Investment Inflows: An Empirical Study on Jordan," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(6), pages 1011-1018.
    6. Ferry Syarifuddin, 2022. "The dynamics of foreign direct investment and exchange rates: An interconnection approach in ASEAN," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2058156-205, December.
    7. Bruno Pires Tiberto & Helder Ferreira de Mendonça, 2023. "Effects of Sustainable Monetary and Fiscal Policy on FDI Inflows to EMDE Countries," Working Papers Series 575, Central Bank of Brazil, Research Department.
    8. Bambe, Bao-We-Wal & Ouedraogo, Adama, 2025. "Public expenditure efficiency and foreign direct investment in developing countries," IDOS Discussion Papers 16/2025, German Institute of Development and Sustainability (IDOS).
    9. John Anyanwu, 2011. "Working Paper 136 - Determinants of Foreign Direct Investment Inflows to Africa, 1980-2007," Working Paper Series 327, African Development Bank.
    10. Todd Sarnstrom & Michael Ryan, 2023. "Third‐country exchange rate effects on foreign direct investment flows: A global vector autoregessive approach," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 522-549, May.
    11. Chrysanthi Balomenou & Erisa Pajollari, 2022. "Impact of Exchange Rate Volatility on International Trade: Case of USA and Canada," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 15(1), pages 47-57, July.
    12. Shi Li & Hironobu Nakagawa, 2022. "Exchange rates and foreign direct investment: Evidence from Chinese firm‐level data," The World Economy, Wiley Blackwell, vol. 45(9), pages 2902-2923, September.
    13. Magdalena Olczyk & Marjan Petreski, 2024. "From Global Value Chains to Local Jobs: Exploring FDI-induced Job Creation in EU-27," Papers 2410.04160, arXiv.org.
    14. Chen, Lin & Tan, Jingrong, 2024. "Does the COVID-19 pandemic exacerbate the disincentive effect of trade tariffs on global value chains (GVCs) embeddedness?," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 404-420.
    15. Takagi, Shinji & Shi, Zongying, 2011. "Exchange rate movements and foreign direct investment (FDI): Japanese investment in Asia, 1987–2008," Japan and the World Economy, Elsevier, vol. 23(4), pages 265-272.
    16. Alexandre Henry, 2019. "Monetary Union, Competitiveness and Raw Commodity Dependence: Insights from Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 285-301, June.
    17. Nadine McCloud & Michael S. Delgado & Man Jin, 2024. "Foreign capital inflows, exchange rates, and government stability," Empirical Economics, Springer, vol. 66(3), pages 945-977, March.
    18. Hummera Saleem & Malik Shahzad Shabbir & Syed Ali Raza Shah & Jalal Shah, 2021. "Nexus between Foreign Direct Investment and Poverty Reduction: A case of Pakistans," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(3), pages 272-280, December.
    19. Warren Moraghen & Boopen Seetanah & Noor Sookia, 2019. "Explaining Heterogeneity in the Effect of the Exchange Rate and Exchange Rate Volatility on Foreign Direct Investment: A Meta‐Analysis Approach," African Development Review, African Development Bank, vol. 31(3), pages 275-291, September.
    20. Ștefan Cristian Gherghina & Liliana Nicoleta Simionescu & Oana Simona Hudea, 2019. "Exploring Foreign Direct Investment–Economic Growth Nexus—Empirical Evidence from Central and Eastern European Countries," Sustainability, MDPI, vol. 11(19), pages 1-33, September.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2401.03096. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.