Browsing by Subject "F21"

Sort by: Order: Results:

Now showing items 1-11 of 11
  • François, Abel; Panel, Sophie; Weill, Laurent (2019)
    BOFIT Discussion Papers 12/2019
    Since political uncertainty is greater in dictatorships than in democracies, we test the hypothesis that foreign investors scrutinize public information on dictators to assess this risk. In particular, we as-sume they use five suitable dictators’ characteristics: age, political experience, education level, ed-ucation in economics, and prior experience in business. We perform fixed effects estimations on an unbalanced panel of 100 dictatorial countries from 1973 to 2008 to explain foreign direct investment (FDI) inflows. We find that educated dictators are more attractive to foreign investors. We obtain strong evidence that greater educational attainment of the leader is associated with higher FDI. We also find evidence that the leader having received education in economics and prior experience in business is associated with greater FDI. By contrast, the leader’s age, and political experience have no relationship with FDI. Our results are robust to several tests and checks, including a comparison with democracies.
  • Fung, K.C.; Korhonen, Iikka; Li, Ke; Ng, Francis (2008)
    BOFIT Discussion Papers 9/2008
    Published in Journal of Economic Integration, September 2009, v. 24, iss. 3, pp. 476–504
    China has emerged as one of the world's leading recipients of foreign direct investment (FDI). Meanwhile, the successful transition experience of many Central and Eastern Euro-pean countries (CEECs) also enables them to attract an increasing share of global foreign investment, particularly from the European Union (EU). What is the relationship between inward FDI of China and the CEECs? We conceptualize the relationship according to three alternative paradigms: 1) China and the CEECs each exist in its own regional pro-duction network, with no linkage between FDI flows into China and into CEECs; 2) China and the CEECs together comprise a global production network, so that FDI into China is positively related to FDI into CEECs; and 3) FDI into China is a substitute for FDI into the CEECs, so that the correlation between them is negative. In this paper, we employ pan-el data to study this issue in detail. Specifically, we compare empirical estimates for 15 CEECs over the 15-year period 1990-2004 using four different econometric approaches: FGLS with Random effects, FGLS with fixed effects, EC2SLS and GMM. The result supports the conclusion that China's inward FDI does not crowd out CEECs' inward FDI. In fact, it shows that in some circumstances FDI flows in these two regions are moderately complementary. In addition, our analysis confirms the importance for FDI flows of recipient-country characteristics such as market size, degree of trade liberalization and labor quality, as well as a healthy global capital market. JEL classification numbers: F20, F21, F43 Keywords: Foreign Direct Investment (FDI), Regional Networks, Global Supply Chain, China's FDI, Central and Eastern European Countries' FDI
  • Nieminen, Mika; Heimonen, Kari; Tohmo, Timo (2017)
    BOFIT Discussion Papers 20/2017
    Published in Open Economies Review, 30, 2, 2019, 319–341
    This study provides novel evidence on the impact of labor market institutions on current account dynamics. Our results suggest that a high degree of coordination of wage bargaining has a positive effect on the current account balance over the long run. This result is not driven entirely by wage moderation induced by centralized wage setting, however. A high degree of coordination of wage bargaining is associated with a slower current account adjustment toward its long-run equilibrium. This result seems theoretically plausible; the aggregate shocks in the exporting sector are largely driven by idiosyncratic shocks and the presence of idiosyncratic shocks increases the importance of labor market flexibility. This analysis of the impact of labor market institutions on current account balances complements the existing empirical current account literature focused on macroeconomic and financial measures.
  • Saka, Orkun (2019)
    Bank of Finland Research Discussion Papers 3/2019
    European banks have been criticized for holding excessive domestic government debt during economic downturns, which may have intensified the diabolic loop between sovereign and bank credit risks. By using a novel bank-level dataset covering the entire timeline of the Eurozone crisis, I first re-confirm that the crisis led to the reallocation of sovereign debt from foreign to domestic banks. This reallocation was only visible for banks as opposed to other domestic private agents and it cannot be explained by the banks' risk-shifting tendency. In contrast to the recent literature focusing only on sovereign debt, I show that banks' private sector exposures were (at least) equally affected by a rise in home bias. Finally, consistent with these patterns, I propose a new debt reallocation channel based on informational frictions and show that informationally closer foreign banks increase their relative exposures when sovereign risk rises. The effect of informational closeness is economically meaningful and robust to the use of different information measures and controls for alternative channels of sovereign debt reallocation.
  • Kinoshita, Yuko; Campos, Nauro F. (2004)
    BOFIT Discussion Papers 10/2004
    This paper investigates the importance of factor endowment vis-à-vis institutions in explaining the locational choice of foreign investors during the 1990s.Using dynamic panel estimation on data for transition economies, we find that low labour costs, bureaucratic efficiency ("institutions"), agglomeration economies and natural resource abundance are key factors explaining foreign investors' decisions.However, sampling proves fundamental as these overall determinants mask deep and, so far empirically unexplored, differences between groups of recipient countries.For example, for the former Soviet Union economies we estimate that labour costs are no longer crucial, but abundance of natural resources and (interestingly) lower levels of human capital are.For Eastern Europe, we find that external liberalisation (one aspect of economic reform) is crucial in foreign investor's decisions.The main message is that minimising sampling biases and accounting for previously omitted variables yields a different, much richer picture than previously available. JEL classification: F21, O16, C33, P27 Keywords: Foreign direct investment, dynamic panel estimation, transition economies
  • Ledyaeva, Svetlana; Linden, Mikael (2006)
    BOFIT Discussion Papers 17/2006
    Barro and Sala-I-Martin empirical framework of neoclassical Solow-Swan model is specified to determine the FDI impact on per capita growth in 74 Russian regions during period of 1996-2003.The Arellano-Bond GMM-DIFF methodology, developed for dynamic panel data models, is used in estimations.Results imply that in general FDI (or related investment components) do not contribute significantly to economic growth in Russia in the analyzed period. Regional growth in 1996-2003 is explained by the initial level of region's economic development, the 1998 financial crisis, domestic investments, and exports.However some evidence of positive aggregate FDI effects in higher-income regions is relevant.Another interesting result is that natural resource availability seems to be growth-inducing in rich regions, while in poor regions it is not significant.We also found convergence between poor and rich regions in Russia.However FDI seems not to play any significant role in the recent growth convergence process among Russian regions. Key words: Foreign Direct Investment (FDI), Russian regional economy, and economic growth JEL Classification: E22, F21, P27
  • Wang, Hao; Fidrmuc, Jan; Tian, Yunhua (2018)
    BOFIT Discussion Papers 14/2018
    This article investigates how the legacy of colonization shapes the impact of inward FDI on employment in the Chinese labor market. The analysis utilizes provincial panel on overall employment and employment in the service sector during 2006-15. We find that inward FDI significantly promotes employment and that this relationship is stronger in regions once colonized by Western countries. Conversely, regions with a legacy of Japanese colonization display a weaker, and even negative, relationship between FDI and employment. These findings are robust to controlling for the length and intensity of colonization, as well as for endogeneity of FDI.
  • Leino, Topias; Ali-Yrkkö, Jyrki (2014)
    Bank of Finland Research Discussion Papers 12/2014
    We study Foreign Direct Investment (FDI) as a measure of real investment (gross fixed capital formation) in foreign-owned companies. Our data include firm-level information on FDI in-flows and real investment of foreign-owned companies located in Finland. Our results suggest that the recorded annual inflows of FDI do not constitute an accurate measure of annual real investments in foreign-owned companies. Since the beginning of the global recession in 2008, FDI inflows have significantly underestimated real investments in foreign companies in Finland. We seek to explain these findings by describing Finnish FDI target enterprises and subgroups and the nature of their FDI flows from several perspectives. We show how FDI target enterprises use other sources of funding, in addition to FDI, and how a few large transactions, often related to cross-border mergers and acquisitions, can explain a great deal of the recorded annual FDI flows. We also describe how Finland's FDI stock and flow data increasingly consist of funds that merely pass through the FDI enterprises and subgroups, arguably with little or no real economic linkage to the Finnish economy, and we present a method for estimating such pass-through funding. Keywords: Foreign Direct Investment, Gross Fixed Capital Formation, Investment, Measurement, Pass-through Investments JEL classification numbers: F210, F23, E220
  • Sanfilippo, Marco (2013)
    BOFIT Discussion Papers 26/2013
    Published in International Business Review, Volume 24, Issue 4, 2015, Pages 665-676 as FDI from emerging markets and the productivity gap-An analysis on affiliates of BRICS EMNEs in Europe.
    This paper analyses differences in total factor productivity and other competitiveness indicators of emerging multinationals (EMNEs) from Brazil, Russia, India, China and South Africa (BRICS) against their counterparts from developed countries and domestic MNEs. The current literature suggests that early internationalisation strategies by EMNEs are characterised by a lack of experience in diverse economic and cultural contexts and are explicitly driven by asset-exploration strategies. If true, this should translate into significant differences in performance, especially when they invest in developed countries. Based on a large database on foreign affiliates in Europe, results find EMNEs at the bottom of the productivity ladder, with a productivity gap around 20-30 percentage points compared to more established competitors. Moreover, the paper points to high heterogeneity among EMNEs that affects their relative performance according to their current levels of productivity or to differences in their sectorial and geographic patterns. Keywords: emerging market multinationals, total factor productivity, foreign direct in-vestment. JEL Codes: F21; F23
  • Ledyaeva, Svetlana (2007)
    BOFIT Discussion Papers 15/2007
    Published in World Economy, Vol. 32, Issue 4, April 2009, pp: 643-666 as "Spatial Econometric Analysis of Foreign Direct Investment Determinants in Russian Regions"
    Using a spatial autoregressive model of cross-sectional and panel data, we study the determinants and dominant strategies of FDI inflows into Russia before and after the 1998 financial crisis. The important determinants of FDI inflows into Russian regions since transition began appear to be market size, the presence of large cities and sea ports, oil and gas availability, and political and legislative risks. Since 1998, it appears the importance of big cities, the Sakhalin region, oil and gas resources and legislation risk has increased, while the importance of political risk and port availability has decreased. Our results also reveal a shift from horizontal FDI strategy to a regional trade-platform FDI strategy. While theory anticipates combined vertical and horizontal motives for regional trade-platform strategies, the lack of evidence of a vertical motive in the Russian case suggests import substitution presently plays a significant role in regional trade-platform FDI. Using a multiple spatial lags approach, we show that neighbouring regions with ports have emerged post-crisis as competitors for FDI and identify agglomeration effects in FDI between adjacent regions with and without ports during the period 1999-2002. Keywords: Foreign Direct Investment, Russian regions, FDI strategy, spatial autoregressive model JEL classification: F21, E22, C21
  • You, Kefei (2015)
    BOFIT Discussion Papers 16/2015
    Published in The Journal of Developing Areas, Volume 51, Number 2, Spring 2017: 239-253
    Our study examines home drivers of China’s regional outward FDI. We propose a theoretical framework that incorporates an extended Investment Development Path (IDP) theory, home locational constraints, policy incentives and geographic factors. Empirically, we employ the Bayesian Averaging Maximum Likelihood Estimates method to address model uncertainty. All proposed theories (except for geographic aspects) are found to provide important perspectives explaining China’s regional outward FDI. Our results highlight the importance of government policies but do not support the original IDP hypothesis that outward investment is automatically generated as income grows. Our findings have implications for both regional and central-government policy.