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Foreign direct investment under uncertainty evidence from a large panel of countries

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  • Caroline Jardet
  • Cristina Jude
  • Menzie Chinn

Abstract

We examine the effect of uncertainty on foreign direct investment inflows for advanced, emerging market and developing countries over a 25‐year long (pre‐Covid) sample. Using a push‐pull framework, and controlling for both global and local factors, we find policy uncertainty has discernable and significant effects on inflows, varying in strength and direction between different groups of countries. Moreover, it is not host country uncertainty that seems to matter the most, but rather global uncertainty. Additionally, we find that high levels of uncertainty matter disproportionately. Finally, financial openness accentuates the impact of uncertainty for emerging market and developing countries.

Suggested Citation

  • Caroline Jardet & Cristina Jude & Menzie Chinn, 2023. "Foreign direct investment under uncertainty evidence from a large panel of countries," Review of International Economics, Wiley Blackwell, vol. 31(3), pages 854-885, August.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:3:p:854-885
    DOI: 10.1111/roie.12646
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    Cited by:

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    5. Konstantinos Lagos & Yuan Wang, . "The threshold effects of global economic uncertainty on foreign direct investment," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
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    7. Fabrizio Leone, 2023. "Multinationals, robots and the labor share," CEP Discussion Papers dp1900, Centre for Economic Performance, LSE.
    8. Hornstein, Abigail S. & Naknoi, Kanda, 2023. "FDI commitments increase when uncertainty is resolved: Evidence from Asia," Journal of Asian Economics, Elsevier, vol. 87(C).

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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