Peterson Institute publications
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search

|

Working Paper 11-3

Foreign Direct Investment in Times of Crisis

by Lauge Skovgaard Poulsen, London School of Economics
and Gary Clyde Hufbauer, Peterson Institute for International Economics

January 2011


This paper compares the current foreign direct investment (FDI) recession with FDI responses to past economic crises. The authors find that although developed country outflows have taken an equally big hit as major developed countries have after past crises, outflows seem to be bouncing back more slowly this time. By contrast with the overall decline in recent years, inflows to emerging markets often remained stable during their past economic crises. Both patterns indicate that the global scale of the current crisis has led to a greater FDI response than after individual country crises in the past. Compared with global economic downturns since the 1970s, the current FDI recession has also been greater in magnitude. The exception is the FDI plunge in the early 2000s, despite the much smaller economic crisis at the time. The authors conclude by recommending that policymakers not just further liberalize FDI regimes—as they find was the typical pattern during earlier crises—but rather use the downturn to rethink their FDI policies with an enhanced focus on "sustainable FDI" promotion.

View full document [pdf]


RELATED LINKS

Paper: Flirting with Default: Issues Raised by Debt Confrontations in the United States February 2014

Op-ed: A Dose of Reality for the Dismal Science April 19, 2013

Op-ed: Five Myths about the Euro Crisis September 7, 2012

Policy Brief 12-18: The Coming Resolution of the European Crisis: An Update June 2012

Book: Resolving the European Debt Crisis March 2012

Policy Brief 12-20: Why a Breakup of the Euro Area Must Be Avoided: Lessons from Previous Breakups August 2012

Testimony: The Euro Area Crisis: Origin, Current Status, and European and US Responses October 27, 2011

Policy Brief 11-15: Sustainability of Greek Public Debt October 2011

Policy Brief 10-27: How Europe Can Muddle Through Its Crisis December 2010

Testimony: A New Regime for Regulating Large, Complex Financial Institutions December 7, 2011

Book: Sovereign Wealth Funds: Threat or Salvation? September 2010

Article: The Dollar and the Deficits: How Washington Can Prevent the Next Crisis November 2009

Policy Brief 09-13: A Solution for Europe's Banking Problem June 2009

Speech: Global Financial Surveillance and the Quest for Financial Stability June 15, 2009

Policy Brief 10-22: Not All Financial Regulation Is Global September 2010

Speech: Addressing the Current Financial Crisis October 7, 2008

Testimony: The Rise of Sovereign Wealth Funds: Impacts on US Foreign Policy and Economic Interests May 21, 2008

Policy Brief 08-3: A Blueprint for Sovereign Wealth Fund Best Practices April 2008

Paper: The Subprime and Credit Crisis April 3, 2008

Op-ed: A Proposal to Improve Regulatory Liquidity May 21, 2008

Book: Reforming the IMF for the 21st Century April 2006

Book: US National Security and Foreign Direct Investment May 2006