Kiel Working Papers, Kiel Institute for World Economics
No 1245:
Business Cycles and FDI: Evidence from German Sectoral Data
Claudia M. Buch and Alexander Lipponer
Abstract: Globalization has effected business cycle developments in
OECD countries and has increased activities of firms across national
borders. This paper analyzes whether these two developments are linked. We
use a new firm-level dataset on the foreign activities of German firms to
test whether foreign activities are affected by business cycle
developments. We aggregate the data by the sector of the reporting firm,
the sector of the foreign affiliate, and the host country. Data are annual
and cover the period 1989-2002. We find that German outward FDI increases
in response to positive cyclical developments abroad and in response to a
real depreciation of the domestic currency.
Keywords: Business cycles, multinational activity, FDI; (follow links to similar papers)
JEL-Codes: E3,; F23; (follow links to similar papers)
39 pages, May 2005
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