International Investment Patterns Research Articles

Navigating through Turbulence: the Influence of COVID-19 and Geopolitical Tensions on International Investment Trends

Contemporarily, the world has experienced significant upheaval marked by two major events, i.e., the COVID-19 pandemic and escalating geopolitical tensions exemplified by the Russia-Ukraine conflict. These crises have profoundly affected social structures, economies, and international relations across the globe. This study examines the profound effects on international investment patterns resulting from these two major crises. Initially, it analyzes the consequences of COVID-19, including the initial outbreak, governmental reactions, and its drastic impacts on the service and tourism sectors. The narrative also covers the stock market's downturn and recovery, along with adjustments in investment strategies due to the pandemic's economic challenges. The second part addresses the geopolitical tensions from the Russia-Ukraine conflict, summarizing its origins, immediate economic impacts on the involved nations, and broader effects on global economic stability. This section also examines shifts in international investment patterns. These results underscore the adaptive measures by investors and policymakers, highlighting the need for resilience and innovation in navigating these global crises.

The Light Assets Trend of Multinational Corporation OFDI and Its Enlightenment to China

The asset-lighting of foreign direct investment is a new phenomenon in the development of multinational corporations. There are four major characteristics: the increase of non-equity investment, the low proportion of fixed capital, the high proportion of investment in the service industry, and the decline of productive investment. Although the current global foreign direct investment There has been a decline for four consecutive years, but due to the impact of COVID-19, the trend of traditional international investment patterns has further emerged. The overseas investment of multinational companies has entered a new stage, which is mainly affected by the strengthening of restrictions on foreign investment by various countries, the digitization of global value chains, and the further decline of manufacturing. Facing the continuous decline in global foreign direct investment and the new trend of asset-light assets of multinational OFDI, China needs to embrace the digital transformation and shift its focus from a traditional investment model to a digital investment model. In the process of foreign investment, we should combine the differentiation of non-equity models to expand overseas markets, build a regional industrial chain, promote regional production specialization and industrial diversification, and use new methods to solve new problems of anti-globalization.

International Investment Patterns: the Case of German Sectors

In this paper we exploit the newly augmented Coordinated Portfolio Investment Survey data of the IMF to study the cross-border inter-sectoral portfolio asset holdings of Germany. Our analysis reveals a significant degree of heterogeneity in German international asset positions of various holding entities. The findings of our study also suggest differential relations between portfolio holdings and a set of ``gravity-style'' factors across holder-issuer pairings of various sectors. We conclude that aggregate-level patterns in international portfolio holdings may not persist in sectoral data.

The Influence of International Investment Patterns in International Economic Law Rulemaking: A Preliminary Sketch

Historically, international investment law has tended to evolve separately from the international trade system.1 This fact has led the specialized expertise in both fields to rarely interact with each other, leading to an artificial and ‘compartmentalized’ vision of these two fundamental areas of international economic law and policy. Indeed, despite their particular features and complexities, international trade and international investment, which for a long time were viewed as substitutes, are no longer two competitive but rather complementary ways to serve and integrate international markets.2 Within this context, over the past decade, literature has acknowledged the need to assess and study both international investment and international trade with a more integrated approach, attempting to find potential synergies between the two.3 Furthermore, over the past century, international investment law has evolved on the basis of a patchy, multilayered, and not always coherent legal framework. Contrary to trade, there is not a comprehensive multilateral agreement on investment, and World Trade Organization (WTO) disciplines only apply partially to some dimensions of investment activity. Instead, international rule making has taken place through a web of thousands of bilateral, regional, and plurilateral agreements. This complexity generates multiple challenges, the discussion of which has attracted the attention of the legal and political economy literature over the past decade.

A note on gravity models and international investment patterns

We show that recent methodological advances in econometric theory raise questions about the results obtained by some influential contributions on the determinants of international investment patterns, since the seminal paper by Lane and Milesi-Ferretti (2008) (LMF). In most such contributions, estimated equations are affected by heteroscedasticity, which may be shown to lead to inconsistent estimates in log-linearized models. Thus, the empirical findings of these works may need to be reassessed. By taking the results in LMF as a benchmark, we use a different methodology, which produces consistent estimates even under heteroscedasticity and report substantial differences with respect to the traditional methods. Moreover, we extend the data-set over time (over years from 2001 to 2009) to estimate a panel gravity model, which allows to properly account for unobserved heterogeneity through country-pair fixed effects and further improves on the cross-section analysis, by also reconciling empirical evidence wit...

A Note on Gravity Models and International Investment Patterns

We show that recent methodological advances in econometric theory raise questions about the results obtained by some influential contributions on the determinants of international investment patterns, since the seminal paper by Lane and Milesi Ferretti (2008) (LMF). In most such contributions, estimated equations are affected by heteroscedasticity, which may be shown to lead to inconsistent estimates in log-linearized models. Thus, the empirical findings of these works may need to be reassessed. By taking the results in LMF as a benchmark, we use a different methodology, which produces consistent estimates even under heteroscedasticity, and report substantial differences with respect to the traditional methods. Moreover, we extend the dataset over time (over years 2001-2009) to estimate a panel gravity model, which allows to properly account for unobserved heterogeneity through country-pair fixed effects, and further improves on the cross-section analysis, by also reconciling empirical evidence with economic theory. Our panel estimates suggest the relevance of a diversification motive in driving international equity purchases.

Factor Proportions and the Growth of World Trade

Most of the expansion of global trade during the last three decades has been of the North-South kind – between capital-abundant developed and labour-abundant developing countries. Based on this observation, I argue that the recent growth of world trade is best understood from a factor-proportions perspective. I present novel evidence documenting that differences in capital-labour ratios across countries have increased in the wake of two shocks to the global economy: i) the opening up of China and ii) financial globalisation and the resulting upstream capital flows towards capital-abundant regions. I analyse their impact on specialisation and the volume of trade in a dynamic model which combines factor-proportions trade in goods with international trade in financial assets. Calibrating this model, I find that it can account for 60% of world trade growth between 1980 and 2007. It is also capable of predicting international investment patterns which are consistent with the data.

Risk sharing, finance, and institutions in international portfolios

We develop a standard model to show how transaction costs in international investment affect conventional tests of consumption risk sharing, both in a multilateral and a bilateral setting. We implement the tests in a novel international data set on bilateral holdings of equity, bonds, foreign direct investment (FDI) and bank loans. In our data, high foreign capital holdings are associated with international consumption risk sharing as implied by our theory. This is especially true of investment in equity or bonds, but not of foreign direct investment or bank loans. In our model, the implication is that transaction costs are higher for FDI and international loans. The discrepancy could reflect technological differences, but also the prospect of expropriation, perhaps most stringent for FDI or loans. We argue that expropriation risk is endogenous to both the borrower's institutions and its openness to international markets. The detrimental impact of poor institutions is muted in open economies, where the possibility of subsequent exclusion from world markets deters expropriation of foreign capital. We show the implied effects of institutions prevail in both the cross-section of consumption risk sharing and in observed international investment patterns.

Competitive interactions: the international investment patterns of Japanese automobile manufacturers

Analyzing the timing, patterns, and competitive interactions of foreign direct investments (FDIs), we find evidence that Japanese automobile manufacturers compete selectively with their domestic rivals. While some firms appear to follow rivals’ investments, they also steer away from markets with incumbent Japanese competitors. Competing in some key markets, these firms also avoid unnecessary competition in other markets. This finding provides evidence that the “bandwagon effect” is not universal for FDI within oligopolistic industries.

Financing agricultural research: International investment patterns and policy perspectives

For much of the post-WWII period, governments in rich and poor countries alike have increased public spending on, and performance of, agricultural research. The public involvement in, and policies toward, agricultural research and development (R&D) have undergone a sea of change in more recent years. In this article we document these changes, focusing on the public and, rapidly evolving, private roles in financing agricultural R&D, and the international dimensions of these funding and policy issues. We restate the principles for government intervention in research, and highlight the financing aspects of these interventions, before concluding the paper with some reflections on the implications of all these changes for internationally conceived and funded public agricultural R&D.