Policy uncertainty and FDI: Evidence from national elections

Kexin Chen · He Nie · Zhenyu Ge

71 citations0/0 files storedJournal of International Trade & Economic Development

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International Business and FDI Corruption and Economic Development Market Dynamics and Volatility

Abstract

This paper examines the impact of policy uncertainty on FDI among 126 countries from 1996 to 2015. Using the timing of national elections as a proxy for policy uncertainty, we find that FDI drops significantly in election years, when policy uncertainty increases. The negative effect of policy uncertainty on FDI also depends on the degree of democratization and the political system. In democracies and countries with the Assembly elected president, the decline of FDI in election years is far more pronounced. Our results highlight the role of policy environment and institution in economic development.

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2016Measuring Economic Policy Uncertainty*2015Measuring Uncertainty 2012Political Uncertainty and Corporate Investment Cycles 2017Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States 2017Political uncertainty and investment: Causal evidence from U.S. gubernatorial elections 2016Policy uncertainty, irreversibility, and cross-border flows of capital 2014Exporting under trade policy uncertainty: Theory and evidence 2016Economic policy uncertainty and unemployment in the United States: A nonlinear approach

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