Nguyen, Canh Phuc and Lee, Gabriel S. (2021) Uncertainty, financial development, and FDI inflows: Global evidence. ECONOMIC MODELLING, 99: 105473. ISSN 0264-9993, 1873-6122
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We analyze uncertainty and financial development effects on foreign direct investment (FDI) inflows using a global sample of 116 countries over 1996 - 2017. Our main findings are that countries with a higher level of economic policy uncertainty receive lower FDI inflows. Moreover, although countries with a higher level of financial market development attract more FDI inflows, domestic uncertainty, even in the presence of more developed financial markets, remains a drag and hence discourages FDI inflows. To further support our results, we analyze three subsamples: low- and lower-middle income, upper-middle income, and high-income countries. For these sub-samples, we show that as uncertainty increases, FDI inflows allocate away from lower-income economies to more stable higher income countries, reflecting the so-called safe haven effect where foreign investors avoid unstable and risky countries. Our findings contribute to better understanding of the interplay among uncertainty ("risk"), FDI, and the host country's level of financial development.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | FOREIGN DIRECT-INVESTMENT; ECONOMIC-POLICY UNCERTAINTY; GROWTH; RISK; INSTABILITY; Economic policy uncertainty; Financial development; FDI |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Immobilienökonomie (Prof. Dr. Gabriel Lee) Business, Economics and Information Systems > Institut für Immobilienenwirtschaft / IRE|BS > Lehrstuhl für Immobilienökonomie (Prof. Dr. Gabriel Lee) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 10 Aug 2022 10:31 |
| Last Modified: | 10 Aug 2022 10:31 |
| URI: | https://pred.uni-regensburg.de/id/eprint/46408 |
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