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Elections and Capital Flows

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  • ADAM HONIG

Abstract

This paper investigates the extent to which elections affect capital flows. I find little evidence of political capital flow cycles in advanced economies. In emerging and developing countries, however, presidential elections significantly lower preelection foreign direct investment (FDI) inflows but have no effect on other types of capital flows. Furthermore, I find evidence that these cycles are not caused by economic crises related to elections or preelection manipulation of policy variables. These results suggest that uncertainty about future government policies, which should have greater impact on more irreversible forms of capital flows like FDI, may be an important factor in generating this cycle.

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  • Adam Honig, 2020. "Elections and Capital Flows," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(2-3), pages 471-503, March.
    • Handle: RePEc:wly:jmoncb:v:52:y:2020:i:2-3:p:471-503
    DOI: 10.1111/jmcb.12599
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    Cited by:

    1. Sangyup Choi & Davide Furceri & Chansik Yoon, 2021. "Policy uncertainty and foreign direct investment," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 195-227, May.
    2. Marvin Jahn & Paul Stricker, 2022. "FDI, liquidity, and political uncertainty: A global analysis," International Economics and Economic Policy, Springer, vol. 19(4), pages 783-823, October.

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