Sovereign default and FDI transactions: Evidence from Argentina

Moonhee Cho and Hyungseok Joo

Economics Letters, 2024, vol. 243, issue C

Abstract: This paper investigates the effect of sovereign debt default on foreign direct investment (FDI) transactions by US firms into Argentina following the Argentine sovereign default in 2019–20. Using the synthetic control approach, we find that the number of FDI transactions decreased by approximately 60% after the Argentine default with a particularly pronounced decline in the non-manufacturing sector. By examining the changes in the number of transactions, we provide a more precise picture of the cost of sovereign default, capturing the FDI activity of small firms better.

Keywords: Foreign direct investment; Sovereign default; Synthetic control; Argentina (search for similar items in EconPapers)
JEL-codes: F13 F21 F34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:243:y:2024:i:c:s0165176524004245

DOI: 10.1016/j.econlet.2024.111940

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