IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/104821.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

The effects of COVID-19 lockdown on Foreign Direct Investment: evidence from Ecuadorian firms

Author

Listed:
  • Camino-Mogro, Segundo
  • Armijos, Mary

Abstract

Foreign Direct Investment has been described as an important factor that contributes to economic growth being of particular importance in developing countries. In this sense, we assess how lockdown/ restriction policies may affect FDI inflows. For this, we exploit the exogenous variation coming from the COVID-19 pandemic and its lockdown policies in Ecuador. We use a regression discontinuity in time design, jointly with official administrative FDI data, and find an overall large decrease in FDI inflows (-63%). We also assess differences across FDI sources and find stronger effects coming from capital increases (-64%) compared to new firm constitutions. In addition, we explore heterogeneity in terms of FDI’s country of origin and find that the negative effects are mostly from inflows coming from north and south American investments. We also assess whether partial re-opening of activities positively affects FDI, for this we use the two largest cities in the country where we do not find any significant effect. Our main conclusion is that lockdown policies have a negative impact on FDI inflows, result that is of high policy relevance which can be a tool to design investment attraction policies.

Suggested Citation

  • Camino-Mogro, Segundo & Armijos, Mary, 2020. "The effects of COVID-19 lockdown on Foreign Direct Investment: evidence from Ecuadorian firms," MPRA Paper 104821, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104821
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/104821/1/MPRA_paper_104821.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/113198/1/MPRA_paper_104821.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Busso Matias & Madrigal Lucia & Pagés Carmen, 2013. "Productivity and resource misallocation in Latin America1)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 903-932, June.
    2. Carrillo-Maldonado, Paul & Díaz-Cassou, Javier, 2023. "An anatomy of external shocks in the Andean region," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    3. Barnes, Stephen R. & Beland, Louis-Philippe & Huh, Jason & Kim, Dongwoo, 2020. "The Effect of COVID-19 Lockdown on Mobility and Traffic Accidents: Evidence from Louisiana," GLO Discussion Paper Series 616, Global Labor Organization (GLO).
    4. Mauro Caselli & Andrea Fracasso & Sergio Scicchitano, 2020. "From the lockdown to the new normal: An analysis of the limitations to individual mobility in Italy following the Covid-19 crisis," Discussion Paper series in Regional Science & Economic Geography 2020-07, Gran Sasso Science Institute, Social Sciences, revised Oct 2020.
    5. Harold L. Cole & Lee E. Ohanian & Álvaro José Riascos & James A. Schmitz, 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 30(Sep).
    6. Meinen, Philipp & Roehe, Oke, 2017. "On measuring uncertainty and its impact on investment: Cross-country evidence from the euro area," European Economic Review, Elsevier, vol. 92(C), pages 161-179.
    7. Nick Bloom & Stephen Bond & John Van Reenen, 2007. "Uncertainty and Investment Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 391-415.
    8. Segundo Camino-Mogro & Grace Armijos-Bravo & Gino Cornejo-Marcos, 2018. "Productividad Total de los Factores en el sector manufacturero ecuatoriano: evidencia a nivel de empresas," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 41(117), pages 241-261, Noviembre.
    9. Segundo Camino Mogro & Natalia Bermudez Barrezueta & Patricio Avilés, 2018. "Análisis Sectorial: Panorama de la Inversión Empresarial en el Ecuador 2013-2017," X-pedientes_Economicos, X-pedientes Económicos, vol. 2(2), pages 79-102.
    10. Dang, Hai-Anh H. & Trinh, Trong-Anh, 2021. "Does the COVID-19 lockdown improve global air quality? New cross-national evidence on its unintended consequences," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    11. Dang, Hai-Anh & Trinh, Trong-Anh, 2020. "Does the COVID-19 Pandemic Improve Global Air Quality? New Cross-National Evidence on Its Unintended Consequences," IZA Discussion Papers 13480, Institute of Labor Economics (IZA).
    12. Adugna Lemi & Sisay Asefa, 2003. "Foreign Direct Investment and Uncertainty: Empirical Evidence from Africa," The African Finance Journal, Africagrowth Institute, vol. 5(1), pages 36-67.
    13. Mihir A. Desai & C. Fritz Foley & Kristin J. Forbes, 2008. "Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciations," The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2857-2888, November.
    14. Julio, Brandon & Yook, Youngsuk, 2016. "Policy uncertainty, irreversibility, and cross-border flows of capital," Journal of International Economics, Elsevier, vol. 103(C), pages 13-26.
    15. Christopher Adam & Mark Henstridge & Stevan Lee, 2020. "After the lockdown: macroeconomic adjustment to the COVID-19 pandemic in sub-Saharan Africa," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(Supplemen), pages 338-358.
    16. -, 2020. "Sectors and businesses facing COVID-19: Emergency and reactivation," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 45736.
    17. Oldekop, Johan A. & Horner, Rory & Hulme, David & Adhikari, Roshan & Agarwal, Bina & Alford, Matthew & Bakewell, Oliver & Banks, Nicola & Barrientos, Stephanie & Bastia, Tanja & Bebbington, Anthony J., 2020. "COVID-19 and the case for global development," World Development, Elsevier, vol. 134(C).
    18. Sangyup Choi & Davide Furceri & Chansik Yoon, 2021. "Policy uncertainty and foreign direct investment," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 195-227, May.
    19. Paul Carrillo Maldonado & María Cecilia Deza & Segundo Camino Mogro, 2020. "Una radiografía a las empresas ecuatorianas antes del COVID-19," X-pedientes_Economicos, X-pedientes Económicos, vol. 4(9), pages 83-117.
    20. Laura Alfaro & Maggie Xiaoyang Chen, 2012. "Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 30-55, August.
    21. Christopher Adam & Mark Henstridge & Stevan Lee, 0. "After the lockdown: macroeconomic adjustment to the COVID-19 pandemic in sub-Saharan Africa," Oxford Review of Economic Policy, Oxford University Press, vol. 36(Supplemen), pages 338-358.
    22. Harold L. Cole & Lee E. Ohanian & Álvaro José Riascos & James A. Schmitz, 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 30(Sep).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ando, Mitsuyo & Hayakawa, Kazunobu, 2022. "Impact of COVID-19 on trade in services," Japan and the World Economy, Elsevier, vol. 62(C).
    2. Ferry Syarifuddin & Maman Setiawan, 2021. "Capital Flow Amid The Covid-19 Pandemic: Cross-Country Contagion Effect Among Asean5 And Projection Of The Impacts For The Indonesian Economy," Working Papers WP/08/2021, Bank Indonesia.
    3. Hayakawa, Kazunobu & Hyun-Hoon, Lee & Cyn-Young, Park, 2022. "Impacts of COVID-19 on foreign direct investment," IDE Discussion Papers 831, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Ferry Syarifuddin & Maman Setiawan, 2022. "The Relationship between COVID-19 Pandemic, Foreign Direct Investment, and Gross Domestic Product in Indonesia," Sustainability, MDPI, vol. 14(5), pages 1-16, February.

    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. Segundo Camino‐Mogro & Mary Armijos, 2022. "Short‐term effects of COVID‐19 lockdown on foreign direct investment: Evidence from Ecuadorian firms," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(4), pages 715-736, May.
    2. Camino-Mogro, Segundo, 2020. "Turbulence in startups: Effect of COVID-19 lockdown on creation of new firms and its capital," MPRA Paper 104502, University Library of Munich, Germany.
    3. Gaaitzen J. Vries, 2014. "Productivity in a Distorted Market: The Case of Brazil's Retail Sector," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 499-524, September.
    4. Dai, Yanke & Li, Baoxin & Xu, Yangfei, 2023. "International transmission of exchange rate volatility: Evidence from FIEs’ investments in China," Journal of Multinational Financial Management, Elsevier, vol. 68(C).
    5. Roman Fossati & Heiko Rachinger & Matheus Stivali, 2021. "Extent and potential determinants of resource misallocation: A cross‐sectional study for developing countries," The World Economy, Wiley Blackwell, vol. 44(5), pages 1338-1379, May.
    6. Bao, Xiaohua & Deng, Jianpeng & Sun, Haoyu & Sun, Jin, 2022. "Trade policy uncertainty and foreign direct investment: Evidence from China’s WTO accession," Journal of International Money and Finance, Elsevier, vol. 125(C).
    7. Andrés Rodríguez-Pose & Michael Storper, 2006. "Better Rules or Stronger Communities? On the Social Foundations of Institutional Change and Its Economic Effects," Economic Geography, Taylor & Francis Journals, vol. 82(1), pages 1-25, January.
    8. Azzimonti, Marina, 2019. "Does partisan conflict deter FDI inflows to the US?," Journal of International Economics, Elsevier, vol. 120(C), pages 162-178.
    9. Angelini, Giovanni & Costantini, Mauro & Easaw, Joshy, 2018. "Uncertainty and spillover effects across the Euro area," Cardiff Economics Working Papers E2018/15, Cardiff University, Cardiff Business School, Economics Section.
    10. Franz Hamann & Fernando Arias-Rodríguez & Jesus Bejarano & Margarita Gafaro & Juan C. Mendez-Vizcaino & Andrea Paola Poveda-Olarte, 2019. "Productividad total de los factores y eficiencia en el uso de los recursos productivos en Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, issue 89, pages 1-54, February.
    11. Roberto Ellery Jr. & Victor Gomes, 2014. "Fiscal Policy, Supply Shocks and Economic Expansion in Brazil from 2003 to 2007," Brazilian Business Review, Fucape Business School, vol. 11(3), pages 53-75, June.
    12. Bamiatzi, Vassiliki & Efthyvoulou, Georgios & Jabbour, Liza, 2017. "Foreign vs domestic ownership on debt reduction: An investigation of acquisition targets in Italy and Spain," International Business Review, Elsevier, vol. 26(5), pages 801-815.
    13. Gordon H. Hanson, 2010. "Why Isn't Mexico Rich?," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 987-1004, December.
    14. Sotiris Blanas & Adnan Seric, 2018. "Determinants of intra‐firm trade: Evidence from foreign affiliates in Sub‐Saharan Africa," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 917-956, September.
    15. Jacob A. Jordaan, 2023. "Firm‐level characteristics and the impact of COVID‐19: Examining the effects of foreign ownership and international trade," The World Economy, Wiley Blackwell, vol. 46(7), pages 1967-1998, July.
    16. Gianluca Femminis, 2019. "Risk aversion heterogeneity and the investment–uncertainty relationship," Journal of Economics, Springer, vol. 127(3), pages 223-264, August.
    17. Carlos Lamarche, 2013. "Industry-wide work rules and productivity: evidence from Argentine union contract data," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-25, December.
    18. Jérôme Héricourt & Sandra Poncet, 2015. "Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms," The World Bank Economic Review, World Bank, vol. 29(3), pages 550-578.
    19. Tasso Adamopoulos & Ahmet Akyol, 2009. "Relative Underperformance Alla Turca," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 697-717, October.
    20. Tosapol Apaitan & Pongsak Luangaram & Pym Manopimoke, 2022. "Uncertainty in an emerging market economy: evidence from Thailand," Empirical Economics, Springer, vol. 62(3), pages 933-989, March.

    More about this item

    Keywords

    COVID-19; Lockdown; Foreign Direct Investment; Regression Discontinuity; Ecuador;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    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:pra:mprapa:104821. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.