FDI inflows; how do they interact with non-FDI inflows during crises? Some evidence from Asia

Abstract

This article examines the interactions of FDI inflows with the other components of capital inflows – namely debt, equity and bank – by analysing both the causes and effects of FDI flows, emphasizing those effects that might occur during crisis periods for a small sample of Asian countries: Korea, Indonesia and Thailand. It is found that crisis periods magnify the relationships between FDI and non-FDI inflows and that crises tend to make inflow substitutes, regardless of what the relationship might have been in noncrisis periods.

Keywords:

• capital inflows
• foreign direct investment
• crises

JEL Classification:

• F32
• F33

Notes

¹ A recent exception is Cavoli (2014).

² See www.adb.org and Table A1

³ Details of the final lag lengths are available upon request.

⁴ Endogeneity is a possibility – especially with the inclusion of the contemporaneous variables. As such, 3SLS results were also generated. The results are very similar to the SUR ones presented here and, as such, are omitted. Naturally, these are available on request.

⁵ See the notes for each table for more information. Further details of the estimates are available from the authors.