Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77046
Authors: 
Dietrich, Diemo
Year of Publication: 
2002
Series/Report no.: 
IWH Discussion Papers 165
Abstract: 
The paper investigates the investment decision of a financially constrained multinational corporation (MNC) planning investment projects both at home and in a developing country. The collateral values of the projects diverge because of country specific transactions costs so that the willingness of banks to grant a loan depends not only on the MNCs financial wealth but also on the share of FDI in total investment. It is shown that i) variations in the MNCs financial standing affects FDI stronger than domestic investment, ii) FDI is likely to decrease following a macroeconomic shock to the MNC parent, and iii) domestic investment is likely to increase following a macroeconomic shock to the MNC affiliate.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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