Foreign direct investment in times of crisis

Abstract

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. JEL Codes: F13, F21, F23

Implications of the liquidity crisis in the Baltic-Nordic region

“…At the same time shrinking economy and increased risks made investments unattractive and foreign funds were flowing out. These developments are also consistent with previous literature (Poulsen & Hufbauer, 2011;Ucal et al, 2010).…”

“…The slowest to recover have been foreign inbound investments to the Baltic States (mostly in Estonia and Latvia). Implications of the slow foreign investments' recovery after the recent crisis can be also found in previous literature (Poulsen & Hufbauer, 2011).…”

“…This requires conservative borrowing and spending during good times. In the crisis period, capital outflows are not only common to emerging economies, but also to other countries (Poulsen & Hufbauer, 2011).…”

FDI and the Subprime Crisis: An Analysis for Asian and Latin American Countries

“…The literature on this subject shows that most studies of the subprime financial crisis and FDI involved qualitative analysis, reporting the possible causes and effects of investment fluctuations during the period and drawing comparisons with past crises (Poulsen & Hufbauer, 2011;Ramamurti, 2011;UNCTAD, 2010). Overall, these studies show that the crisis led to a decline in FDI in both developed and developing countries due to the risks and uncertainties associated with the fragility of the global economy (UNCTAD, 2010).…”

The selected problems of economic development of Mexico at the begining of the twenty-first century

“…In connection with this, the favorable business outlook in the U.S. will increase Mexican exports and an influx of American capital to Mexico, which activates the economic development of this country. On the other hand, any worsening in the economic situation in the northern neighbor had a negative effect on the Mexican economy as it did in the years 2001 and 2009 [Poulsen, Hufbauer 2011].To reduce the dependence on the U.S. is the major challenge for the Mexican government in the coming decades. Economic dependence on the U.S. is not the only problem of the country.…”