Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

This paper investigates the effect that tight credit conditions had on outward foreign direct investment flows during the 2008-2010 global financial crisis. A difference-in-differences approach is used to isolate a "credit channel" impact...

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Main Authors:	Desbordes, Rodolphe, Wei, Shang-Jin
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	ACCESS TO CAPITAL ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESSIBILITY ADVERSE SELECTION ALTERNATIVE BANKING ALTERNATIVE ENERGY AVAILABILITY OF CREDIT BALANCE OF PAYMENTS BANK LIQUIDATIONS BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BENEFICIARY BROAD ACCESS BUSINESS MANAGEMENT CAPITAL INVESTMENT CAPITAL INVESTMENTS CASE OF BANKRUPTCY CASE OF DEFAULT CASH FLOWS COLLATERAL CONSUMERS CORPORATE FINANCE COUNTRY FIXED EFFECTS CREDIT CONSTRAINTS CREDIT GROWTH CREDIT INFORMATION CREDIT REGISTRY CURRENCY CURRENCY CRISES DAY TRADING DEBT FINANCING DEBT LIABILITIES DEPENDENT DEVELOPMENT POLICY DOMESTIC BANK DOMESTIC CREDIT DOMESTIC INVESTORS DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMIC GROWTH EQUIPMENT EQUITY STAKE EXISTING ASSETS EXPENDITURES EXPORTS EXTERNAL CAPITAL EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL DISTRESS FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FINANCIAL SHOCKS FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING NEEDS FINANCING OBSTACLES FIXED ASSETS FIXED COSTS FOREIGN ASSETS FOREIGN DEBT FOREIGN DIRECT INVESTMENT FOREIGN INVESTOR FOREIGN MARKETS GDP GROWTH OPPORTUNITIES HOLDING HOME COUNTRY INFORMATIONAL ASYMMETRIES INSTRUMENT INTANGIBLE INTANGIBLE ASSETS INTERNAL FINANCE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVESTING INVESTMENT FLOWS JURISDICTION LACK OF ACCESS LARGE FIRMS LEGAL FRAMEWORK LEGAL ORIGIN LEGAL RIGHTS LENDERS LIQUIDATIONS LOAN MANUFACTURING INDUSTRY MARKETS DATABASE MERGERS MORAL HAZARD MOVABLE ASSETS MULTINATIONAL OUTPUT OUTSTANDING AMOUNT PARENT COMPANIES PARENT COMPANY PATENTS PRIVATE CREDIT PUBLIC CREDIT REAL GDP REGULATORY REQUIREMENTS RIGHTS OF CREDITORS SEIZURE SEIZURE OF ASSETS SELF-FINANCE SELF-FINANCING SMALL BUSINESS SOURCES OF FUNDS SPECIFIC ASSET STOCK MARKET SUPPLY SHOCKS SYSTEMIC BANKING CRISES TANGIBLE ASSETS TRADING UNINTERRUPTED ACCESS VALUE ADDED WEALTH WORLD INVESTMENT REPORT
Online Access:	http://documents.worldbank.org/curated/en/2014/10/20299035/credit-conditions-foreign-direct-investment-during-global-financial-crisis http://hdl.handle.net/10986/20502

id	okr-10986-20502
recordtype	oai_dc
spelling	okr-10986-205022021-04-23T14:03:56Z Credit Conditions and Foreign Direct Investment During the Global Financial Crisis Desbordes, Rodolphe Wei, Shang-Jin ACCESS TO CAPITAL ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESSIBILITY ADVERSE SELECTION ALTERNATIVE BANKING ALTERNATIVE ENERGY AVAILABILITY OF CREDIT BALANCE OF PAYMENTS BANK LIQUIDATIONS BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BENEFICIARY BROAD ACCESS BUSINESS MANAGEMENT CAPITAL INVESTMENT CAPITAL INVESTMENTS CASE OF BANKRUPTCY CASE OF DEFAULT CASH FLOWS COLLATERAL CONSUMERS CORPORATE FINANCE COUNTRY FIXED EFFECTS CREDIT CONSTRAINTS CREDIT GROWTH CREDIT INFORMATION CREDIT REGISTRY CURRENCY CURRENCY CRISES DAY TRADING DEBT FINANCING DEBT LIABILITIES DEPENDENT DEVELOPMENT POLICY DOMESTIC BANK DOMESTIC CREDIT DOMESTIC INVESTORS DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMIC GROWTH EQUIPMENT EQUITY STAKE EXISTING ASSETS EXPENDITURES EXPORTS EXTERNAL CAPITAL EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL DISTRESS FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FINANCIAL SHOCKS FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING NEEDS FINANCING OBSTACLES FIXED ASSETS FIXED COSTS FOREIGN ASSETS FOREIGN DEBT FOREIGN DIRECT INVESTMENT FOREIGN INVESTOR FOREIGN MARKETS GDP GROWTH OPPORTUNITIES HOLDING HOME COUNTRY INFORMATIONAL ASYMMETRIES INSTRUMENT INTANGIBLE INTANGIBLE ASSETS INTERNAL FINANCE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVESTING INVESTMENT FLOWS JURISDICTION LACK OF ACCESS LARGE FIRMS LEGAL FRAMEWORK LEGAL ORIGIN LEGAL RIGHTS LENDERS LIQUIDATIONS LOAN MANUFACTURING INDUSTRY MARKETS DATABASE MERGERS MORAL HAZARD MOVABLE ASSETS MULTINATIONAL OUTPUT OUTSTANDING AMOUNT PARENT COMPANIES PARENT COMPANY PATENTS PRIVATE CREDIT PUBLIC CREDIT REAL GDP REGULATORY REQUIREMENTS RIGHTS OF CREDITORS SEIZURE SEIZURE OF ASSETS SELF-FINANCE SELF-FINANCING SMALL BUSINESS SOURCES OF FUNDS SPECIFIC ASSET STOCK MARKET SUPPLY SHOCKS SYSTEMIC BANKING CRISES TANGIBLE ASSETS TRADING UNINTERRUPTED ACCESS VALUE ADDED WEALTH WORLD INVESTMENT REPORT This paper investigates the effect that tight credit conditions had on outward foreign direct investment flows during the 2008-2010 global financial crisis. A difference-in-differences approach is used to isolate a "credit channel" impact of the global financial crisis on foreign direct investment. The global financial crisis had a stronger negative impact on the relative volume of outward foreign direct investment in financially vulnerable sectors in more financially developed countries, especially if these countries also experienced a banking crisis. These results suggest that lack of access to external finance can partly explain the drop in foreign direct investment during the global financial crisis. 2014-10-30T21:03:31Z 2014-10-30T21:03:31Z 2014-10 http://documents.worldbank.org/curated/en/2014/10/20299035/credit-conditions-foreign-direct-investment-during-global-financial-crisis http://hdl.handle.net/10986/20502 English en_US Policy Research Working Paper;No. 7063 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCESS TO CAPITAL ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESSIBILITY ADVERSE SELECTION ALTERNATIVE BANKING ALTERNATIVE ENERGY AVAILABILITY OF CREDIT BALANCE OF PAYMENTS BANK LIQUIDATIONS BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BENEFICIARY BROAD ACCESS BUSINESS MANAGEMENT CAPITAL INVESTMENT CAPITAL INVESTMENTS CASE OF BANKRUPTCY CASE OF DEFAULT CASH FLOWS COLLATERAL CONSUMERS CORPORATE FINANCE COUNTRY FIXED EFFECTS CREDIT CONSTRAINTS CREDIT GROWTH CREDIT INFORMATION CREDIT REGISTRY CURRENCY CURRENCY CRISES DAY TRADING DEBT FINANCING DEBT LIABILITIES DEPENDENT DEVELOPMENT POLICY DOMESTIC BANK DOMESTIC CREDIT DOMESTIC INVESTORS DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMIC GROWTH EQUIPMENT EQUITY STAKE EXISTING ASSETS EXPENDITURES EXPORTS EXTERNAL CAPITAL EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL DISTRESS FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FINANCIAL SHOCKS FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING NEEDS FINANCING OBSTACLES FIXED ASSETS FIXED COSTS FOREIGN ASSETS FOREIGN DEBT FOREIGN DIRECT INVESTMENT FOREIGN INVESTOR FOREIGN MARKETS GDP GROWTH OPPORTUNITIES HOLDING HOME COUNTRY INFORMATIONAL ASYMMETRIES INSTRUMENT INTANGIBLE INTANGIBLE ASSETS INTERNAL FINANCE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVESTING INVESTMENT FLOWS JURISDICTION LACK OF ACCESS LARGE FIRMS LEGAL FRAMEWORK LEGAL ORIGIN LEGAL RIGHTS LENDERS LIQUIDATIONS LOAN MANUFACTURING INDUSTRY MARKETS DATABASE MERGERS MORAL HAZARD MOVABLE ASSETS MULTINATIONAL OUTPUT OUTSTANDING AMOUNT PARENT COMPANIES PARENT COMPANY PATENTS PRIVATE CREDIT PUBLIC CREDIT REAL GDP REGULATORY REQUIREMENTS RIGHTS OF CREDITORS SEIZURE SEIZURE OF ASSETS SELF-FINANCE SELF-FINANCING SMALL BUSINESS SOURCES OF FUNDS SPECIFIC ASSET STOCK MARKET SUPPLY SHOCKS SYSTEMIC BANKING CRISES TANGIBLE ASSETS TRADING UNINTERRUPTED ACCESS VALUE ADDED WEALTH WORLD INVESTMENT REPORT
spellingShingle	ACCESS TO CAPITAL ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESSIBILITY ADVERSE SELECTION ALTERNATIVE BANKING ALTERNATIVE ENERGY AVAILABILITY OF CREDIT BALANCE OF PAYMENTS BANK LIQUIDATIONS BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BENEFICIARY BROAD ACCESS BUSINESS MANAGEMENT CAPITAL INVESTMENT CAPITAL INVESTMENTS CASE OF BANKRUPTCY CASE OF DEFAULT CASH FLOWS COLLATERAL CONSUMERS CORPORATE FINANCE COUNTRY FIXED EFFECTS CREDIT CONSTRAINTS CREDIT GROWTH CREDIT INFORMATION CREDIT REGISTRY CURRENCY CURRENCY CRISES DAY TRADING DEBT FINANCING DEBT LIABILITIES DEPENDENT DEVELOPMENT POLICY DOMESTIC BANK DOMESTIC CREDIT DOMESTIC INVESTORS DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMIC GROWTH EQUIPMENT EQUITY STAKE EXISTING ASSETS EXPENDITURES EXPORTS EXTERNAL CAPITAL EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL DISTRESS FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FINANCIAL SHOCKS FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING NEEDS FINANCING OBSTACLES FIXED ASSETS FIXED COSTS FOREIGN ASSETS FOREIGN DEBT FOREIGN DIRECT INVESTMENT FOREIGN INVESTOR FOREIGN MARKETS GDP GROWTH OPPORTUNITIES HOLDING HOME COUNTRY INFORMATIONAL ASYMMETRIES INSTRUMENT INTANGIBLE INTANGIBLE ASSETS INTERNAL FINANCE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVESTING INVESTMENT FLOWS JURISDICTION LACK OF ACCESS LARGE FIRMS LEGAL FRAMEWORK LEGAL ORIGIN LEGAL RIGHTS LENDERS LIQUIDATIONS LOAN MANUFACTURING INDUSTRY MARKETS DATABASE MERGERS MORAL HAZARD MOVABLE ASSETS MULTINATIONAL OUTPUT OUTSTANDING AMOUNT PARENT COMPANIES PARENT COMPANY PATENTS PRIVATE CREDIT PUBLIC CREDIT REAL GDP REGULATORY REQUIREMENTS RIGHTS OF CREDITORS SEIZURE SEIZURE OF ASSETS SELF-FINANCE SELF-FINANCING SMALL BUSINESS SOURCES OF FUNDS SPECIFIC ASSET STOCK MARKET SUPPLY SHOCKS SYSTEMIC BANKING CRISES TANGIBLE ASSETS TRADING UNINTERRUPTED ACCESS VALUE ADDED WEALTH WORLD INVESTMENT REPORT Desbordes, Rodolphe Wei, Shang-Jin Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
relation	Policy Research Working Paper;No. 7063
description	This paper investigates the effect that tight credit conditions had on outward foreign direct investment flows during the 2008-2010 global financial crisis. A difference-in-differences approach is used to isolate a "credit channel" impact of the global financial crisis on foreign direct investment. The global financial crisis had a stronger negative impact on the relative volume of outward foreign direct investment in financially vulnerable sectors in more financially developed countries, especially if these countries also experienced a banking crisis. These results suggest that lack of access to external finance can partly explain the drop in foreign direct investment during the global financial crisis.
format	Publications & Research :: Policy Research Working Paper
author	Desbordes, Rodolphe Wei, Shang-Jin
author_facet	Desbordes, Rodolphe Wei, Shang-Jin
author_sort	Desbordes, Rodolphe
title	Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
title_short	Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
title_full	Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
title_fullStr	Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
title_full_unstemmed	Credit Conditions and Foreign Direct Investment During the Global Financial Crisis
title_sort	credit conditions and foreign direct investment during the global financial crisis
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/10/20299035/credit-conditions-foreign-direct-investment-during-global-financial-crisis http://hdl.handle.net/10986/20502
_version_	1764445550203109376

Credit Conditions and Foreign Direct Investment During the Global Financial Crisis

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