Foreign Direct Investment And International Business Cycle Comovement
- Topics:
- Foreign Direct Investment
- Tags:
- Currency & Foreign Exchange,
- European Central Bank,
- Finance,
- Foreign Direct Investment,
- Foreign Direct Investment (FDI),
- International Business,
- Investment
- Source:
- European Central Bank
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Overview: This paper investigates the relationship between bilateral FDI (Foreign Direct Investment) positions and cross-country business cycle correlations in the period 1982 - 2001. One find a positive association between FDI linkages and output comovement, but this may partly reflect the effects of trade relations. Moreover, more intensive FDI links are also associated with a greater vulnerability to lagged output spillovers from abroad, whereas trade links are not. Policy implications of the research are: That there is an underlying tendency for business cycles to exhibit greater comovement in the future; and that policy makers need to incorporate the FDI linkage among economies in their models and analytical framework for policy analysis.
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Format: PDF | Size: 842KB | Date: Oct 2004 | Pages: 35





