Does Foreign Direct Investment Promote Economic Stability in Developing Countries?

Camilla Jensen

Research output: Working paperResearch


Does foreign direct investment aid or hinder economic recovery ensuing a financial crisis? The paper tests the hypothesis that foreign direct investors are less affected by volatility (uncertainty) on their investment decisions. The data comes from the Business Enterprise and Economic Performance Surveys (BEEPS) collected by the World Bank. The investment data is applied using a Q model specification and sales growth data using a simple SCP model. The main finding is that foreign held firms are different from domestically held firms and especially domestically export active firms because of lower adjustment cost (which makes them continue to invest) during episodes of uncertainty.
Original languageEnglish
PublisherSSRN: Social Science Research Network
Number of pages26
Publication statusPublished - 29 Nov 2011
Externally publishedYes
SeriesThe University of Nottingham Research Papers

Cite this