Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

Rodolphe Desbordes, Shang-Jin Wei

Research output: Working paper

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.
LanguageEnglish
Number of pages27
Volume7063
Publication statusPublished - 1 Oct 2014

Publication series

NameWorld Bank Policy Research Working Paper
PublisherWorld Bank

Fingerprint

Global financial crisis
Foreign direct investment
Credit
Outward foreign direct investment
Developed countries
Banking crisis
External finance
Difference-in-differences
Credit channel

Keywords

  • banking crisis
  • credit constraints
  • financial development
  • foreign direct investment
  • global financial crisis

Cite this

Desbordes, R., & Wei, S-J. (2014). Credit Conditions and Foreign Direct Investment During the Global Financial Crisis. (World Bank Policy Research Working Paper).
Desbordes, Rodolphe ; Wei, Shang-Jin. / Credit Conditions and Foreign Direct Investment During the Global Financial Crisis. 2014. (World Bank Policy Research Working Paper).
@techreport{6dc430dbcba64f39b6ff2898a73eeeaf,
title = "Credit Conditions and Foreign Direct Investment During the Global Financial Crisis",
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.",
keywords = "banking crisis, credit constraints, financial development, foreign direct investment, global financial crisis",
author = "Rodolphe Desbordes and Shang-Jin Wei",
year = "2014",
month = "10",
day = "1",
language = "English",
volume = "7063",
series = "World Bank Policy Research Working Paper",
publisher = "World Bank",
type = "WorkingPaper",
institution = "World Bank",

}

Desbordes, R & Wei, S-J 2014 'Credit Conditions and Foreign Direct Investment During the Global Financial Crisis' World Bank Policy Research Working Paper.

Credit Conditions and Foreign Direct Investment During the Global Financial Crisis. / Desbordes, Rodolphe; Wei, Shang-Jin.

2014. (World Bank Policy Research Working Paper).

Research output: Working paper

TY - UNPB

T1 - Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

AU - Desbordes, Rodolphe

AU - Wei, Shang-Jin

PY - 2014/10/1

Y1 - 2014/10/1

N2 - 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.

AB - 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.

KW - banking crisis

KW - credit constraints

KW - financial development

KW - foreign direct investment

KW - global financial crisis

UR - http://documents.worldbank.org/curated/en/2014/10/20299035/credit-conditions-foreign-direct-investment-during-global-financial-crisis

M3 - Working paper

VL - 7063

T3 - World Bank Policy Research Working Paper

BT - Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

ER -

Desbordes R, Wei S-J. Credit Conditions and Foreign Direct Investment During the Global Financial Crisis. 2014 Oct 1. (World Bank Policy Research Working Paper).

Access to Document