Foreign Direct Investment in Emerging Markets: Income, Repatriations and Financial Vulnerabillities
IMF Working Papers, March 1, 2002
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- Foreign Direct Investment in Emerging Markets: Income, Repatriations and Financial Vulnerabillities
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Bibliographic details
- Authors: Alexander Lehmann
- Published: March 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846652.001
Key findings
- Based on U.S. data, the returns on foreign direct investment in emerging markets are shown to be substantially higher than would be suggested by official balance of payments statistics.
- After controlling for financial leverage and the effect of tax minimizing income transfers, host country risk and market openness are found to raise affiliate returns on equity and returns on sales.
- In the context of a number of financial crises during the 1990s, income repatriations are shown to be pro-cyclical.
- The adverse effect of host country recessions on repatriations is mitigated through continued spending on fixed capital and a re-direction of affiliate sales towards export markets.
Determinants of FDI profitability (scope and methodology)
- Sample covers 43 industrialized and developing countries.
- Controls applied include financial leverage and tax minimizing income transfers.
- Outcomes analyzed include affiliate returns on equity and returns on sales.
Behavior during crises and cyclical dynamics
- Income repatriations increase in line with economic cycles (pro-cyclical) during financial crises in the 1990s.
- Mitigating mechanisms in host country recessions:
- Continued spending on fixed capital.
- Re-direction of affiliate sales towards export markets.
Subjects and keywords (as labeled in the source)
- Subject: Balance of payments; Emerging and frontier financial markets; Financial institutions; Financial markets; Foreign direct investment; Labor; National accounts; Personal income; Stocks; Wages
- Keywords: Africa; Asia and Pacific; B. FDI; Cashflows in Multinational Corporations; earnings; Emerging and frontier financial markets; FDI flow; FDI income; FDI inflow; FDI share; FDI transactions; Foreign direct investment; foreign direct investment enterprise; host country FDI statistics; investor; North America; parent company; Personal income; Profitability of Foreign Direct Investment; return on equity; Stocks; Wages; WP