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Foreign Direct Investment under Uncertainty: Evidence from a Large Panel of Countries

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  • Caroline Jardet
  • Cristina Jude
  • Menzie D. Chinn

Abstract

We examine the effect of uncertainty on foreign direct investment inflows for a heterogeneous sample of advanced, emerging market and developing countries over a 25 year long (pre-Covid) sample. Using a push-pull framework, and controlling for both global and local factors, we find policy uncertainty has discernable and significant effects on inflows, but those effects vary in strength and direction between different groups of countries. Moreover, it is not host country uncertainty that seems to matter the most, but rather global uncertainty. Additionally, we find that high levels of uncertainty matter disproportionately. Finally, financial openness accentuates the impact of uncertainty for emerging market and developing countries.

Suggested Citation

  • Caroline Jardet & Cristina Jude & Menzie D. Chinn, 2022. "Foreign Direct Investment under Uncertainty: Evidence from a Large Panel of Countries," NBER Working Papers 29687, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29687
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    Cited by:

    1. Leone, Fabrizio, 2021. "Foreign Ownership and Robot Adoption," CEPREMAP Working Papers (Docweb) 2111, CEPREMAP.
    2. Jaewon Jung, 2023. "Multinational Firms and Economic Integration: The Role of Global Uncertainty," Sustainability, MDPI, vol. 15(3), pages 1-18, February.
    3. Ketan REDDY & Subash SASIDHARAN & Shandre Mugan THANGAVELU, 2024. "Does Economic Policy Uncertainty Impact Firm GVC Participation? Microdata Evidence from India," Working Papers DP-2024-23, Economic Research Institute for ASEAN and East Asia (ERIA).
    4. Fabrizio Leone, 2023. "Multinationals, robots and the labor share," CEP Discussion Papers dp1900, Centre for Economic Performance, LSE.
    5. Hornstein, Abigail S. & Naknoi, Kanda, 2023. "FDI commitments increase when uncertainty is resolved: Evidence from Asia," Journal of Asian Economics, Elsevier, vol. 87(C).
    6. Bermpei, Theodora & Ferrara, Laurent & Karadimitropoulou, Aikaterini & Triantafyllou, Athanasios, 2024. "Commodity currencies revisited: The role of global commodity price uncertainty," Journal of International Money and Finance, Elsevier, vol. 145(C).
    7. Konstantinos Lagos & Yuan Wang, . "The threshold effects of global economic uncertainty on foreign direct investment," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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