Germany’s Foreign Direct Investment in Times of Geopolitical Fragmentation
IMF Working Papers, June 28, 2024
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Bibliographic details
- Authors: Kevin Fletcher, Veronika Grimm, Thilo Kroeger, Aiko Mineshima, Christian Ochsner, Andrea F Presbitero, Paul Schmidt-Engelbertz, Jing Zhou
- Published: June 28, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400279942.001
Summary and context
- Global geopolitical tensions have risen in recent years, and European energy prices have been volatile following Russia’s invasion of Ukraine.
- The paper leverages two detailed and complementary FDI datasets and develops a new measure of geopolitical alignment to explore recent trends in German FDI and how it is affected by geopolitical tensions and energy prices.
- Publication details:
- By Kevin Fletcher, Veronika Grimm, Thilo Kroeger, Aiko Mineshima, Christian Ochsner, Andrea F Presbitero, Paul Schmidt-Engelbertz, Jing Zhou
- June 28, 2024
- Pages: 34
- Volume: 2024
- Issue: 130
- Series: Working Paper No. 2024/130
- DOI: https://doi.org/10.5089/9798400279942.001
- Stock No: WPIEA2024130
- ISBN: 9798400279942
- ISSN: 1018-5941
Main empirical findings
- The post-pandemic recovery in Germany’s inward and outward FDI has been weaker than in the US or the rest of the European Union (EU27) as a whole.
- Germany’s outward FDI linkages with geopolitically distant countries have been weakening since the Global Financial Crisis.
- The relationship between Germany’s outward FDI and geopolitical distance has become more pronounced over the last six years.
- Germany’s outward FDI to China-Russia bloc countries is more sensitive to recent geopolitical developments compared with that to US-bloc countries.
- Germany’s outward FDI in energy-intensive sectors decreases as destination countries’ energy costs increase, but energy costs do not appear to have a statistically significant effect on outward FDI in non-energy intensive sectors.
Data, measurement, and scope
- Uses two detailed and complementary FDI datasets (dataset names not listed on the page).
- Develops a new measure of geopolitical alignment to assess how geopolitical distance and bloc affiliation affect FDI patterns.
- Examines both inward and outward FDI for Germany, with sectoral analysis distinguishing energy-intensive and non-energy intensive sectors.
Subject coverage and keywords
- Subject areas: Balance of payments, Energy prices, Foreign direct investment, Fuel prices, Imports, International trade, Prices
- Keywords: Annex I. FDI stock, Energy prices, FDI activity, FDI dataset, foreign direct investment, Fuel prices, geopolitical fragmentation, Germany, Germany's FDI, Global, Imports, outward FDI
Source: IMF Working Paper "Germany’s Foreign Direct Investment in Times of Geopolitical Fragmentation", Working Paper No. 2024/130, June 28, 2024.
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