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Resource discoveries and FDI bonanzas

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  • Pierre-Louis Vezina

Abstract

This paper examines the examines the effect of giant oil and gas discoveries on foreign direct investment in developing economies using a new project-level dataset. We document a large increase in non-extraction FDI in the 2 years following a giant discovery, an event which is unpredictable due to the uncertain nature of exploration. We find that FDI inflows increase by 73% and that this wave is driven by a 37% increase in the number of FDI projects as well as a 22% increases in source countries and a 17% increase in target sectors. We interpret this FDI response as evidence for the news-driven business-cycle hypothesis within a developing country setting and highlight FDI bonanzas as an important development channel for resource rich economies.

Suggested Citation

  • Pierre-Louis Vezina, 2016. "Resource discoveries and FDI bonanzas," OxCarre Working Papers 177, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:177
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    Cited by:

    1. Girard, Victoire & Kudebayeva, Alma & Toews, Gerhard, 2020. "Inflated Expectations and Commodity Prices: Evidence from Kazakhstan," GLO Discussion Paper Series 469, Global Labor Organization (GLO), revised 2020.
    2. Mark Henstridge, 2018. "Understanding the boom: Country study—Tanzania," WIDER Working Paper Series 177, World Institute for Development Economic Research (UNU-WIDER).
    3. Nigel Driffield & Katiuscia Lavoratori & Yama Temouri, 2021. "Inward investment and UK productivity," Working Papers 014, The Productivity Institute.
    4. Mark Henstridge, 2018. "Understanding the boom: Country study—Tanzania," WIDER Working Paper Series wp-2018-177, World Institute for Development Economic Research (UNU-WIDER).
    5. Mark Henstridge, 2018. "Understanding the boom: A framing paper," WIDER Working Paper Series 178, World Institute for Development Economic Research (UNU-WIDER).
    6. Mark Henstridge, 2018. "Understanding the boom: A framing paper," WIDER Working Paper Series wp-2018-178, World Institute for Development Economic Research (UNU-WIDER).
    7. Cust,James Frederick & Mihalyi,David, 2017. "Evidence for a presource curse ? oil discoveries, elevated expectations, and growth disappointments," Policy Research Working Paper Series 8140, The World Bank.
    8. Bjørn Bo Sørensen & Christian Estmann & Enilde Sarmento & John Rand, 2020. "Economic complexity and structural transformation: the case of Mozambique," WIDER Working Paper Series wp-2020-141, World Institute for Development Economic Research (UNU-WIDER).
    9. Torfinn Harding & Radoslaw Stefans & Gerhard Toews, 2020. "Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation," The Economic Journal, Royal Economic Society, vol. 130(630), pages 1715-1728.
    10. Mihalyi, David, 2020. "The Long Road to First Oil," MPRA Paper 103725, University Library of Munich, Germany.

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    More about this item

    Keywords

    giant discoveries; news shocks; investment.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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