The effect of covid-19 outbreak on foreign direct investment: do sovereign wealth funds matter?

Abstract

This article investigates effects of COVID-19 outbreak on Foreign Direct Investment (FDI). Additionally, it examines how Sovereign Wealth Funds (SWFs) affect the COVID-19 – FDI nexus in 79 developed and developing countries. Unlike previous studies that incorporate an interaction term into the model to analyse the mediating effect of a given variable, in this paper we segment our sample into two sub-samples (countries with SWFs and countries without SWFs) and estimate the model for each sub-sample. Using a cross-sectional Ordinary Least Squares (OLS), results show that both the total number of death and the total cases are negatively correlated to FDI. Moreover, when considering the role of SWFs, regressions suggest that the COVID-19 outbreak reduces significantly FDI in countries without sovereign wealth funds, while its effect is non-significant in countries with SWFs.

Keywords:

• Covid-19
• FDI
• Sovereign wealth funds

Acknowledgment

No funding was granted for this research work.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Active cases = Total cases - (Total death + total recovered).

Additional information

Notes on contributors

Larissa Nawo

Larissa Nawo is an Assistant Lecturer at University of Dschang-Cameroon in the area of Development Economics. She researches in the areas of Institutional economic, economics of conflicts, Applied economy and Sovereign Wealth Funds.

Henri Njangang

Henri Njangang is an Assistant Lecturer at University of Dschang-Cameroon in the area of Development Economics. His research interest centres on Macroeconomics, Financial Economics, Applied Economy, and FDI.