FDI: Hot or Cold Money? The Behaviour of Sectoral FDI Inflows and Outflows Over Periods of Growth Accelerations and Decelerations

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The economic crisis caused by the COVID-19 pandemic invokes questions about a possible prolonged economic deceleration. In this article, we study the impact of output growth accelerations and decelerations, as per the definition of Arbache and Page (2007, More growth or fewer collapses? A new look at long run growth in Sub-Saharan Africa [Working Paper 4384]) and Conceicao and Kim (2010, The asymmetric impact of growth fluctuation on human development: Evidence from correlates of growth decelerations and accelerations. Mimeo), on sector-level foreign direct investment (FDI) inflows and outflows for a group of 34 OECD countries in the period 1995–2019. The results show that Finance services FDI and transport services FDI inflows are countercyclical, while manufacturing FDI outflows are procyclical. Transport services FDI outflows are countercyclical, and the most significant determinant of both FDI inflows and outflows is the control of corruption, respectively, in the host and home countries.