Foreign Direct Investment and the Business Cycle: New Insights after the Great Recession

Carlos Rodriguez and Ricardo Bustillo ()

Prague Economic Papers, 2015, vol. 2015, issue 2, 136-153

Abstract: In this paper we examine how business cycles in the home country affect outward flows of FDI (OFDI). We employ a panel data set of OFDI flows for a representative sample of countries from 1970 to 2011. The findings of the regression models that we have used are consistent with the hypothesis that OFDI flows behave pro-cyclically. This is the case for different country subsamples, for different business cycle specifications and for the inclusion of other control variables as well. Beyond this main conclusion, home country interest rate and exchange rates reveal a negative effect upon OFDI flows.

Keywords: foreign direct investment; real exchange rate; multinational firms; business cycles (search for similar items in EconPapers)
JEL-codes: F21 F23 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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DOI: 10.18267/j.pep.505

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