Policy uncertainty, irreversibility, and cross-border flows of capital

Brandon Julio and Youngsuk Yook

Journal of International Economics, 2016, vol. 103, issue C, 13-26

Abstract: We examine the effects of political uncertainty on cross-border capital flows using election timing as a source of fluctuations in political uncertainty. FDI flows from US companies to foreign affiliates drop significantly during the period just before an election and increase after the uncertainty is resolved, consistent with the view that political uncertainty deters foreign investment. The electoral patterns in FDI flows are more pronounced when elections are more competitive. The impact of political uncertainty on FDI flows depends on the level of institutional quality. Countries with higher levels of institutional quality experience significantly less variation in FDI around election cycles.

Keywords: Political uncertainty; Institutional quality; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F21 G15 G18 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (155)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199616300915
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:103:y:2016:i:c:p:13-26

DOI: 10.1016/j.jinteco.2016.08.004

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().