Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

Desbordes, Rodolphe and Wei, Shang-Jin (2014) Credit Conditions and Foreign Direct Investment During the Global Financial Crisis. Working paper. The World Bank.

[thumbnail of Desbordes-Wei-PRWP-7063-Credit-conditions-and-foreign-direct-investment-during-the-global]
Preview
Text (Desbordes-Wei-PRWP-7063-Credit-conditions-and-foreign-direct-investment-during-the-global)
Desbordes_Wei_PRWP_7063_Credit_conditions_and_foreign_direct_investment_during_the_global.pdf
Final Published Version

Download (654kB)| Preview

    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.

    ORCID iDs

    Desbordes, Rodolphe ORCID logoORCID: https://orcid.org/0000-0001-8923-5401 and Wei, Shang-Jin;