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.
| Original language | English |
|---|---|
| Number of pages | 27 |
| Volume | 7063 |
| Publication status | Published - 1 Oct 2014 |
Publication series
| Name | World Bank Policy Research Working Paper |
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| Publisher | World Bank |
Keywords
- banking crisis
- credit constraints
- financial development
- foreign direct investment
- global financial crisis
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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).