Foreign Direct Investment in Emerging Markets: Income, Repatriations and Financial Vulnerabillities

March 1, 2002

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Alexander Lehmann. Foreign Direct Investment in Emerging Markets: Income, Repatriations and Financial Vulnerabillities, (USA: International Monetary Fund, 2002) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Based on U.S. data, the returns on foreign direct investment in emerging markets are shown to be substantially higher than would be suggested by official balance of payments statistics. This paper identifies the determinants of FDI profitability in 43 industrialized and developing countries. After financial leverage and the effect of tax minimizing income transfers are controlled for, host country risk and market openness are found to raise affiliate returns on equity and returns on sales. In the context of a number of financial crises during the 1990s, income repatriations are shown to be pro-cyclical, though the effect of host country recessions is mitigated through continued spending on fixed capital and a re-direction of affiliate sales towards export markets.

Subject: Balance of payments, Emerging and frontier financial markets, Financial institutions, Financial markets, Foreign direct investment, Labor, National accounts, Personal income, Stocks, Wages

Keywords: Africa, Asia and Pacific, B. FDI, Cashflows in Multinational Corporations, Earnings, Emerging and frontier financial markets, FDI flow, FDI income, FDI inflow, FDI share, FDI transactions, Foreign direct investment, Foreign direct investment enterprise, Host country FDI statistics, Investor, North America, Parent company, Personal income, Profitability of Foreign Direct Investment, Return on equity, Stocks, Wages, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/047
Stock No:

WPIEA0472002
ISBN:

9781451846652
ISSN:

1018-5941

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