Robert Lipsey has provided another interesting paper on foreign direct investment, a topic on which he’s been working for some time. FDI accounts for about a quarter of total international capital flows in the 1990s. As Robert has pointed out, particularly for developing countries it has been the most dependable source of foreign investment. This was starkly illustrated in the Asian crisis. FDI to emerging Asian economies as a whole, and the crisis countries in particular, continued virtually unabated while bankers proved ‘fair weather friends’ switching from massive inflows to massive withdrawals.
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