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Sovereign Default and FDI Transactions: Evidence from Argentina

Author

Listed:
  • Moonhee Cho

    (Korea Institute for International Economic Policy)

  • Hyungseok Joo

    (University of Surrey)

Abstract

This paper investigates the effect of sovereign debt default on foreign direct investment (FDI) transactions by US firms into Argentina following the Argentine sovereign default in 2019–20. Using the synthetic control approach, we find that the number of FDI transactions decreased by approximately 60% after the Argentine default with a particularly pronounced decline in the non-manufacturing sector. By examining the changes in the number of transactions, we provide a more precise picture of the cost of sovereign default, capturing the FDI activity of small firms better.

Suggested Citation

  • Moonhee Cho & Hyungseok Joo, 2024. "Sovereign Default and FDI Transactions: Evidence from Argentina," School of Economics Discussion Papers 0324, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:0324
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    File URL: https://repec.som.surrey.ac.uk/2024/DP03-24.pdf
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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