Credit Conditions and Foreign Direct Investment During the Global Financial Crisis [electronic resource] / Desbordes, Rodolphe
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TextPublication details: Washington, D.C., The World Bank, 2014Description: 1 online resource (27 p.)Subject(s): Access to Finance | Banking Crisis | Bankruptcy and Resolution of Financial Distress | Credit Constraints | Debt Markets | Economic Theory & Research | Emerging Markets | Finance and Financial Sector Development | Financial Development | Foreign Direct Investment | Global Financial Crisis | Macroeconomics and Economic Growth | Private Sector DevelopmentAdditional physical formats: Desbordes, Rodolphe: Credit Conditions and Foreign Direct Investment During the Global Financial Crisis.Online resources: Click here to access online Abstract: This paper investigates the effect that tight credit conditions had on outward foreign direct investment flows during the 2008-2010 global financial crisis. A difference-in-differences approach is used to isolate a "credit channel" impact of the global financial crisis on foreign direct investment. The global financial crisis had a stronger negative impact on the relative volume of outward foreign direct investment in financially vulnerable sectors in more financially developed countries, especially if these countries also experienced a banking crisis. These results suggest that lack of access to external finance can partly explain the drop in foreign direct investment during the global financial crisis.
This paper investigates the effect that tight credit conditions had on outward foreign direct investment flows during the 2008-2010 global financial crisis. A difference-in-differences approach is used to isolate a "credit channel" impact of the global financial crisis on foreign direct investment. The global financial crisis had a stronger negative impact on the relative volume of outward foreign direct investment in financially vulnerable sectors in more financially developed countries, especially if these countries also experienced a banking crisis. These results suggest that lack of access to external finance can partly explain the drop in foreign direct investment during the global financial crisis.
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