We examine multinationals’ optimal entry modes into foreign markets as a function of market size, FDI fixed costs, tariffs and transport costs. Our results highlight why large countries are more likely to attract acquisition investment, while intermediate sized countries may be served predominantly through trade, even in the presence of high tariffs. Small countries are most likely to experienc...

We explain why China is a “chaotic” or “strange” attractor of FDI. It is an “attractor” because its FDI inflows increased steadily even though the world FDI inflows have decreased considerably in recent years. It is indeed “strange,” since its rates of FDI return are below the world average and predictions of its economic collapse are abundant. We find that Hong Kong and Taiwan are predominant ...

What impact does foreign direct investment (FDI) have on indigenous technological creation? Despite the answer to this question is both academically interesting and practically important, systematic empirical studies are lacking. This study attempts to help fill this gap by conducting an empirical investigation of the effects of FDI on indigenous technological creation using a firm-level survey...

Article history: Received 17 May 2013 Received in revised form 27 May 2013 Accepted 30 May 2013 Available online 10 June 2013 This paper provides comprehensive, detailed documentation of major corporate governance reforms (CGRs) undertaken by 26 advanced and emerging economies. We investigate whether these reforms have altered investor protection (IP) and impacted corporate investments. Specifi...

We attempt to explain why standard explanations of the poverty of nations are unsatisfactory. We first argue that human capital is low in poor countries because its production has increasing returns with respect to life expectancy. We then show that the reason why capital does not flow to poor countries (the Lucas paradox) can readily be explained once market prices rather than PPP prices are u...

This paper uses a large panel of bilateral bank flow data to assess how institutions and politics affect international capital -bank in particularflows. The following key findings emerge: 1) The empirical "gravity" model is the benchmark in explaining the volume of international banking activities. 2) Conditioned on standard gravity factors (distance, GDP, population), well-functioning institut...

This paper shows how the rise in individual income risk in the US since the 1980s might help explain the fall in its foreign asset position. The key to this result is endogenous financial deepening in an open economy with participation-constrained domestic financial markets. There, more volatile income makes individuals less inclined to default on financial contracts as this excludes them from ...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Using a dataset which breaks down FDI flows into primary, sec...

Evidence on international capital ‡ows suggests that foreign direct investment (FDI) is less volatile than other ...nancial ‡ows. To explain this ...nding, I model international capital ‡ows under the assumptions of imperfect enforcement of ...nancial contracts and inalienability of FDI. Imperfect enforcement of contracts leads to endogenous ...nancing constraints and the pricing of default ris...