TY  - BOOK
AU  - Elo,Kinga Z.
TI  - The Effect of Capital Controlson Foreign Direct Investment Decisions Under Country Risk with Intangible Assets
T2  - IMF Working Papers; Working Paper
SN  - 1451866437 :
SN  - 1018-5941
PY  - 2007///
CY  - Washington, D.C.
PB  - International Monetary Fund
KW  - Capital Control
KW  - imf
KW  - Corporate Finance and Governance: Government Policy and Regulation
KW  - Decisions Under Uncertainty
KW  - Direct Investment
KW  - FDI
KW  - Foreign Direct Investment
KW  - Botswana
KW  - Bulgaria
KW  - China, People's Republic of
KW  - El Salvador
KW  - Korea, Republic of
N2  - This paper examines how capital controls affect FDI decisions and how the impact of these restrictive measures varies with different levels of country risk. We construct a model of firms' FDI decisions, broadly in Dunning's "eclectic theory" framework, using "real options" to emphasize economic uncertainty and country risk. Numerical results of the model take the form of "quality statistics" that uncover the underlying dynamics hidden in the aggregate data that is responsible for the low performance of recent empirical studies. We find that increasing levels of capital controls reduce the life-span of FDI investments at each level of country risk and foreign investors' willingness towards risk sharing increases. We reveal a significant interaction between capital control and country risk, resulting in a nonlinear relationship between these and the volatility and volume statistics. We estimate a standard cross-sectional model that provides strong support for our theoretical findings
UR  - http://elibrary.imf.org/view/IMF001/06913-9781451866438/06913-9781451866438/06913-9781451866438.xml
UR  - http://www.imfbookstore.org/IMFORG/9781451866438
ER  -