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Foreign Direct Investment in Times of Crisis


  • Lauge Skovgaard Poulsen

    () (London School of Economics)

  • Gary Clyde Hufbauer

    () (Peterson Institute for International Economics)


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.

Suggested Citation

  • Lauge Skovgaard Poulsen & Gary Clyde Hufbauer, 2011. "Foreign Direct Investment in Times of Crisis," Working Paper Series WP11-3, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp11-3

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    References listed on IDEAS

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    2. Elena A. Iankova & Atanas G. Tzenev, 2015. "Determinants Of Sovereign Investment Protectionism: The Case Of Bulgaria’S Nuclear Energy Sector," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 6(2).
    3. DIACONU MAXIM Laura, 2015. "The Dynamics Of The Fdi Inflows During The Last Three Decades. A Comparative Analysis Between Developing And Developed Countries," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 67(3), pages 46-62.
    4. Zeinab Asqari, 2014. "Investors Legitimate Expectations and the Interests of the Host State in Foreign Investment," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(12), pages 1906-1918, December.
    5. 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.
    6. Marta Anna GÖTZ, 2015. "Pursuing FDI policy in the EU – Member States and their policy space," Journal of Economics and Political Economy, KSP Journals, vol. 2(2), pages 290-308, June.
    7. 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).
    8. Natalya Ketenci, 2015. "Capital mobility in the panel GMM framework: Evidence from EU members," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 12(1), pages 3-19, July.
    9. Pedro Nel Páez & Jorge Isaza & Luz Amanda Zamora, 2014. "Los países del tercer mundo frente a la crisis europea," REVISTA FACULTAD DE CIENCIAS ECONÓMICAS, UNIVERSIDAD MILITAR NUEVA GRANADA, vol. 0(1), pages 215-230, June.
    10. Ivo Karilaid & Tõnn Talpsepp & Tarvo Vaarmets, 2014. "Implications of the liquidity crisis in the Baltic-Nordic region," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 14(1-2), pages 35-54, December.
    11. 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.
    12. Wooster, Rossitza B. & Blanco, Luisa & Sawyer, W. Charles, 2016. "Equity commitment under uncertainty: A hierarchical model of real option entry mode choices," International Business Review, Elsevier, vol. 25(1), pages 382-394.
    13. Selahattin GURIS & Irem SACAKLI SACILDI & Elif GUNEREN GENC, 2015. "Determining the Effects of Factors on FDI in Global Crisis Period," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 1-10.
    14. Adina DORNEAN & Dumitru-Cristian OANEA, 2015. "Impact Of The Economic Crisis On Fdi In Central And Eastern Europe," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 16, pages 53-68, December.
    15. Dorożyński Tomasz & Kuna-Marszałek Anetta, 2016. "Investments Attractiveness. The Case Of The Visegrad Group Countries," Comparative Economic Research, De Gruyter Open, vol. 19(1), pages 119-140, March.

    More about this item


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

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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