VOX  CEPR Policy Portal

Understanding how host-country financial conditions influence the global operations of multinational firms is important for encouraging FDI. Using US data, this column show that more financially developed economies have more entry by multinational affiliates and higher aggregate affiliate sales to the local market, back to the US and to third destinations, particularly in more financially vulnerable sectors. Yet at both aggregate and affiliate levels, the share of local sales in total sales is smaller, while the shares of US and third-country sales are bigger.