The impact of restrictions on FDI

Marco Albori (), Flavia Corneli, Valerio Nispi Landi and Alessandro Schiavone ()
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Marco Albori: Bank of Italy
Alessandro Schiavone: Bank of Italy

No 656, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In the 1990s and 2000s, most countries – including many emerging economies – lifted some barriers to FDI together with trade liberalization; this trend has slowed since the global financial crisis. In this paper, we assess the impact of FDI restrictions on gross inflows by exploiting the sectoral dimension of FDI flows and of the Regulatory Restrictiveness Index (RRI) reported in the OECD databases. In a sample of 17 OECD countries and 23 sectors covering the years 2012-2018, we find that FDI restrictions significantly dampen foreign investments in the manufacturing and service sectors, particularly when they limit foreign equity acquisitions. We also take into account restrictions motivated by national security considerations, which are not scored in the RRI; similarly to other restrictions involving screening schemes, they have not had a significant impact on the size of FDI flows so far.

Keywords: foreign direct investment; capital controls; national security (search for similar items in EconPapers)
JEL-codes: F21 F38 F52 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-cwa and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_656_21

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