Sovereign Risk, FDI Spillovers, and Growth

Abstract

This paper studies the effect of sovereign risk on capital flows from rich to poor nations in the context of a two-country model, where Foreign Direct Investment (FDI) creates positive externalities in domestic production. We show that if externalities are large, a developing country never expropriates foreign assets, and behaves as under perfect enforcement of foreigners' property rights, jumping to the steady state in one period. If externalities are absent, a developing country always expropriates foreign assets and, then, there are no capital flows in equilibrium, as occurs in autarky. If externalities are of a medium size, our model can account for scarce capital flows from rich to poor nations, as well as other key features of the data, such as rising-over-time patterns of foreign capital and FDI in developing countries. In addition, the model offers an economic rationale for the FDI restrictions observed across nations. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

Riesgo soberano y política monetaria: efectos sobre los préstamos bancarios y el crédito comercial

“…Por lo que respecta al riesgo de crédito de los bancos, Goldman Sachs (2010) revela que en los años de crisis de deuda en la zona euro, los CDS (Credit Default 18 Puesto que el riesgo soberano ejerce un impacto significativo sobre la economía y las posibilidades de crecimiento de los países, diversos trabajos han analizado la influencia que tiene el mismo sobre distintas variables económicas. Por ejemplo, algunos trabajos encuentran que el riesgo soberano afecta negativamente a la inversión directa extranjera que reciben los países (Schnitzer, 1999;Reinhart y Rogoff, 2004;Maliar et al, 2008;Chen et al, 2014), mientras que otros estudios indican que un mayor riesgo soberano acorta los vencimientos de los bonos de deuda pública (Xie et al, 2009;Lee et al, 2011;Broner et al, 2013) y reduce la rentabilidad de las acciones en los mercados bursátiles (Brooks et al, 2004;Ferreira y Gama, 2007;Hooper et al, 2008;Arnold, 2012;Chan-Lau et al, 2014). Swap) bancarios están positivamente correlacionados con los CDS soberanos de sus respectivos países.…”

Does foreign aid reduce the country's risk of OFDI? The Chinese experience

“…OFDI presents enormous potential and opportunities for development, but it also comes with attending risk (Ramcharran, 1999; Nordal, 2001; Maliar et al, 2010). According to a report released by Deloitte, more than 50% of China's overseas mergers and acquisitions have failed to appreciate, while the failure rate of Chinese mining investments abroad has reached 80%.…”

Sovereign Risk and Out-of-Equilibrium Exchange Rate Dynamics

“…Most studies focus on the role of fiscal variables not only in emerging economies (Eichengreen and Mody, 2000), but also in OECD countries (Alesina et al., 1992; Ardagna et al., 2007; Chinn and Frankel, 2005; Lemmen and Goodhart, 1999) and among US states (Bayoumi et al., 1995; Laubach, 2009). Other economic concepts are also shown to be important, such as asymmetric information in Kletzer (1984), US monetary policy in Arora and Cerisola (2001), international reserves in Aizenman and Marion (2004) and Ben‐Bassat and Gottlieb (1992), exchange rate policy in Barajas et al (2008) and Jahjah and Yue (2004), political elections in Vaaler et al (2006), information quality of macro aggregates in Lee (2009), foreign direct investment in Maliar et al (2008) and Schnitzer (2002), stock returns in Kaminsky and Schmukler (2002), and global risk appetite in Baek et al (2005), García‐Herrero and Ortiz‐Saravia (2006), and González‐Rozada and Levi‐Yeyati (2008). Our paper contributes to the literature by stressing the role of net foreign assets.…”