Emerging markets are not the hot investment prospect they used to be. This column estimates that weaker private investment in these nations is a slowdown after a period of boom rather than an outright slump. Prospects for a recovery of business investment, however, are not promising. Commodity prices are expected to remain weak and external financial conditions are set to become tighter.
Nicolas Magud, Sebastián Sosa, Wednesday, May 13, 2015
Joshua Aizenman, Yothin Jinjarak, Huanhuan Zheng, Monday, May 4, 2015
China’s export-led growth has coincided with the country becoming one of the largest net global creditors. This column looks ahead to the next chapter of Chinese ‘outwards mercantilism’ – FDI investment in natural resources, commodities and mining bundled with access to finance and the export of Chinese capital products and labour services.
Theodore H. Moran, Friday, January 30, 2015
Joining international supply chains has helped some developing nations to industrialise while leaving others by the wayside. This column discusses research that extract lessons from four case studies. It suggests the key to success is combining pro-active investment promotion with customised infrastructure improvements and public-private vocational training that allow investors to fit production from a novel site seamlessly into the company’s international supplier network.
Ron Alquist, Rahul Mukherjee, Linda Tesar, Monday, December 22, 2014
Foreign direct investment is an essential element in 21st century development strategies. This column discusses new evidence that estimates the importance of financial liquidity as a driver of such flows into emerging-market economies. Financial liquidity considerations are key determinants of the size and ownership structure of these investments.
Kozo Kiyota, Thursday, November 27, 2014
A major concern with multinationals is that they can cause disemployment (also called job offshoring). However, FDI could offset or even exceed such a negative effect. This column examines to what extent disemployment in Japan is related to FDI. The results suggest that disemployment in Japan is driven by substitution between capital and labour, rather than the reallocation of labour caused by FDI.
Hiau Looi Kee, Friday, November 21, 2014
The conventional thinking about foreign direct investment is that it may create jobs but also take away market opportunities from domestic firms. This column suggests another spillover to consider. If foreign firms require higher quality inputs, domestic firms who share suppliers with foreign firms gain access to better local inputs. It then argues that this spillover effect can explain a third of the productivity gains within Bangladeshi firms during 1999-2003.
Heiwai Tang, Wenjie Chen, Monday, September 22, 2014
Using a new, unique, and comprehensive data set that covers close to 19,000 Chinese ODI deals from 1998 to 2011, we find that in contrast to the common perception, over half of the ODI deals are in service sectors, with many of them appearing to be related to export promotion. Ex ante larger, more productive, and more export-intensive firms are more likely to start investing abroad. Ex post, ODI appears to enhance firm performance (i.e., total factor productivity, employment, export intensity, and product innovation). Empirical analysis based on firms’ trade transaction data shows a significantly positive effect of ODI on firms’ trade performance, but little technology transfer.
Eric Neumayer, Peter Nunnenkamp, Martin Roy, Friday, August 1, 2014
Hoping to attract more FDI, developing countries are increasingly entering stricter investment agreements. But there is no conclusive evidence that such agreements serve them well. This column argues that contagion may help explain this trend. Competition between developing countries for FDI from developed ones could drive the diffusion of international investment agreements.
Bernhard Dachs, Georg Zahradnik, Sunday, July 6, 2014
The Global Crisis brought a halt to three decades of R&D internationalisation, in which foreign firms’ share of total R&D expenditure had increased in almost all countries where data is available. However, this column argues that the crisis did not lead to a new global distribution of overseas R&D expenditure, despite the erosion of the EU’s share. The persistence of R&D expenditure is attributed to the costs of relocating R&D and to the autonomy of foreign subsidiaries.
Theodore H. Moran, Lindsay Oldenski, Tuesday, March 4, 2014
The US has once again ranked among the top two recipient countries for foreign direct investment. This column examines the effects of these large FDI inflows on the US domestic economy. Foreign multinationals are – alongside US-headquartered American multinationals – the most productive and highest-paying segment of the US economy. In addition, they provide positive spillovers to US firms. About 12% of the total productivity growth in the US from 1987 to 2007 can be attributed to productivity spillovers from inward FDI.
Holger Görg, Christiane Krieger-Boden, Adnan Seric, Tuesday, December 10, 2013
An expansion in the scope of foreign direct investment in sub-Saharan Africa promises to promote development in one of the poorest regions of the world. This column investigates the extent to which working with foreign multinationals enhances the capabilities of African firms. Acting as a supplier to a multinational enterprise improves a firm’s labour productivity, product and process innovation, while buying from a multinational improves only labour productivity. Governments should take advantage of these spillovers by promoting trade.
Ayumu Tanaka, Wednesday, November 20, 2013
Policymakers fear the negative employment effects of foreign direct investment. This column provides recent empirical evidence on FDI and domestic employment. The results show that FDI has positive effects on domestic employment. Furthermore, our new empirical research finds a non-negative relationship between Japanese firms' foreign activities and their suppliers' domestic employment.
Thomas Holmes, Ellen McGrattan, Edward C. Prescott, Friday, November 8, 2013
Why are FDI flows between China and technologically-advanced countries surprisingly small? This column analyses the issue in light of China's quid pro quo policy that makes technology transfer a precondition of foreign firms selling in China. We find that the policy provides significant gains for China, but losses to its FDI partners.
Dennis Reinhardt, Salvatore Dell'Erba, Monday, July 8, 2013
FDI flows tend to come in waves and concentrate in certain sectors. This column examines episodes of large gross foreign direct investment inflows - surges – at the sectoral level in emerging markets. It suggests that surges in the financial sector are associated with boom-bust cycles in domestic GDP and with expansions of credit in foreign currency. Moreover, restrictions on other forms of capital inflows tend to increase the likelihood of surges in financial-sector FDI.
Sebnem Kalemli-Ozcan, Christian Fons-Rosen, Bent E. Sørensen, Carolina Villegas-Sanchez, Vadym Volosovych, Tuesday, June 4, 2013
During the decades of globalisation, flows of foreign direct investment have surged in parallel with extensive policy momentum. This column examines whether the net aggregate gain from FDI is positive using a large panel of firms from 30 European countries. It turns out that even very large increases in FDI are not important for country-level productivity growth.
Victor Duggan, Sjamsu Rahardja, Gonzalo Varela, Wednesday, May 22, 2013
The ‘manufacturing matters’ movement has gained prominence on the policy agenda even as the nature of manufacturing continues to morph. This column discusses new research showing that opening service sectors to competition and foreign direct investment can be a powerful conduit for productivity gains in manufacturing. The gains depend on both the types of reforms and the specific services sectors in which these are implemented.
Yasuyuki Todo, Saturday, May 11, 2013
Japan looks set to participate in the Trans-Pacific Partnership (TPP) negotiations. Reflecting the current debate in Japan, this column assesses what effect the Partnership will have on Japan’s growth. Evidence suggests that the economic effects may be far bigger than the current consensus suggests.
Ron Alquist, Linda Tesar, Rahul Mukherjee, Tuesday, March 26, 2013
Is foreign direct investment different in times of crisis? This column tests the ‘fire-sale foreign direct investment hypothesis’, finding that acquisitions undertaken during crisis periods do not fundamentally differ from those undertaken during non-crisis periods. The fire-sale foreign direct investment notion may well be ‘all smoke, and no fire’.
Richard Baldwin, Toshihiro Okubo, Thursday, May 24, 2012
New-paradigm globalisation – driven by lower coordination costs rather than trade costs – is changing the nature of international commerce, the political economy of trade liberalisation, the nature of trade agreements and much more. This column, using data on Japanese multinationls, presents evidence that the nature of FDI is also changing away from the traditional classification of ‘horizontal’ or ‘vertical’.
Maximiliano Sosa Andrés, Christiane Krieger-Boden, Peter Nunnenkamp, Thursday, March 8, 2012
Investors from emerging and developing economies are becoming bigger players in FDI, particularly in developing countries. While some raise concerns that emerging economies might gain control over raw materials, others are hopeful that non-traditional investors might provide new opportunities for development. This column analyses these new FDI flows and finds that while fears may be exaggerated so too is the optimism.