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Foreign direct investment and macroeconomic risk

Jinjarak, Yothin (2007) 'Foreign direct investment and macroeconomic risk.' Journal of Comparative Economics, 35 (3). pp. 509-519.

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Abstract

Motivated by the macroeconomic fluctuations and policy regime switches frequently observed in developing countries, this paper provides cross country-industry evidence on the links between a host country's macro risks and foreign direct investment (FDI) activities. For each industry I measure vertical FDI share as a ratio of exports to a parent country relative to local sales by foreign affiliates. Using a panel sample from 1989 to 1999, 1 find that FDI activities of US multinationals in industries with higher share of vertical FDI respond disproportionately more to negative effects of macro-level demand, supply, and sovereign risks. However, when institutional quality and total FDI share of the host country are sufficiently low, the merits of cross-industry vertical versus horizontal FDI in response to macro risks disappear.

Item Type: Articles
SOAS Departments & Centres: Faculty of Law and Social Sciences > Department of Financial and Management Studies
ISSN: 01475967
DOI (Digital Object Identifier): 10.1016/j.jce.2007.05.002
Depositing User: Yothin Jinjarak
Date Deposited: 15 Jun 2010 11:22
URI: http://eprints.soas.ac.uk/id/eprint/8630

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