Does Money Follow the Flag?
We examine whether bilateral political relations can explain investment and trade flows between the United States and other countries. We treat political relations as endogenous using instrumental variable analysis and investigate whether an exogenous shock to political relations, the 2003 war in Iraq, leads to a shift in economic flows. The results suggest that a deterioration in bilateral relations is followed by a significant decrease in economic flows between the United States and that country. These results are robust to country fixed effects, income, industry growth, financial market development, and risk.
international capital flows foreign portfolio investment political relations
Nandini Gupta Xiaoyun Yu
Kelley School of Business, Indiana University
国际会议
广州
英文
1-33
2009-07-07(万方平台首次上网日期,不代表论文的发表时间)