COVID-19 PANDEMIC AND OUTWARD FOREIGN DIRECT INVESTMENT: A PRELIMINARY NOTE

Authors

  • Tolulope T. Osinubi
  • Folorunsho M. Ajide

DOI:

https://doi.org/10.2478/eoik-2020-0019

Abstract

Social-distance policy of most governments and the pandemic impact of corona virus (COVID-19) on
human health are expected to shutter international investment and business environment. However,
there is little or no study to show the early empirical evidence on this relationship, most especially
its impacts on FDI flows in the economies. This note provides a preliminary evidence of the impact
of COVID-19 on FDI outflows. Our data cover cross-sectional first quarter, average data; between
1 January – 31 March, 2020 from 43 countries. Using Ordinary least square (OLS) and Quantile
regressions, we document that there is a positive relationship between COVID-19 confirmed cases
and FDI outflows. In addition, there is a positive impact of COVID-19 related confirmed deaths
on FDI outflows across all quartiles estimations. This means that COVID-19 pandemic fuels the
foreign direct investment outflows. The major causes could be the reduction in the ability of firms to
invest due to a shortage in the number of skilled employees because they care for their health safety, a
decline in corporate profits and increase in cost of finance. In addition, the propensities to invest have
been widely affected negatively in most economies. These factors also become obvious when most
economies experience a very high level of risk perception in financial market.

Downloads

Published

2021-02-08

Issue

Section

Чланци