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Fire‐sale FDI ? The Impact of Financial Crises on Foreign Direct Investment
Author(s) -
Stoddard Olga,
Noy Ilan
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12149
Subject(s) - foreign direct investment , economics , international economics , financial crisis , monetary economics , tariff , business , macroeconomics
We analyze the evolution of foreign direct investment ( FDI ) inflows to developing and emerging countries around financial crises. We empirically examine the Fire‐Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI . We distinguish between mergers and acquisitions ( M & A ) and greenfield investment, as well as between horizontal (tariff jumping) and vertical (integrating production stages) FDI . We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI . We do not find empirical evidence of fire‐sale FDI ; on the contrary, financial crises are shown to affect FDI flows and M & A activity negatively.