1. Economic policy uncertainty and foreign direct investment: Evidence from China.
- Author
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Gao, Han, Chen, Wenbin, Li, Jie, and Zhou, Tianhang
- Subjects
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FOREIGN investments , *ECONOMIC uncertainty , *GLOBAL Financial Crisis, 2008-2009 , *ECONOMIC policy , *CITIES & towns - Abstract
This paper examines the influence of economic policy uncertainty (EPU) on foreign direct investment (FDI). By utilizing a comprehensive dataset spanning 264 Chinese cities from 2005 to 2014, we uncover a negative relationship between EPU and FDI inflows. In addition, through heterogeneity tests, we demonstrate that this effect is more pronounced in cities characterized by a higher degree of marketization, stronger financial development, and a larger proportion of industrial production. Moreover, we observe that FDI exhibits greater sensitivity to EPU fluctuations following the 2008 Global Financial Crisis. To provide an explanation for these findings, we propose an open-economy model incorporating uncertainty. • We show the negative impact of rising EPU on FDI. • We use the data on province-level EPU and city-level FDI. • FDI is more sensitive to EPU in better developed cities. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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