The Cyclical Nature of North-South FDI Flows

By Eduardo Levy-Yeyati, U. Panizza, Ernesto H. Stein. 2003

222 citations recorded by the source corpus.

In this paper, we examine how the business and interest rate cycles in developed countries affect FDI to developing countries. After aggregating flows into three big source areas (the U.S., Europe and Japan), we find FDI flows to be countercyclical with respect to both output and interest rate cycles in the first two, whereas in Japan they display either no cyclical behavior or mild procyclical behavior. This finding is consistent with the fact that FDI outflows and local investment tend to move in opposite directions during the cycles in the U.S. and Europe, reflecting investors' arbitrage among different investment opportunities. In sum, and contrary to what is usually claimed, we conclude that recessions in industrial countries are likely to increase FDI flows, particularly to those countries with close ties with the U.S. and Europe.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1140f2879eac412623206e526ee4ecf1f52d5237

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In Economics and Econometrics

Citations in the corpus

Inward FDI and growth: The role of macroeconomic and institutional environment (2011, background): “Overall, the developing world has seen its share of FDI in aggregate net resource flows increase from a paltry 5.3% in 1980 to more than 60% in 2000 (see Yeyati et al, 2007).”