Economic resilience to the FDI shock during the COVID-19 pandemic: evidence from Asia

Abstract

PurposeThe purpose of this paper is to study the impact of economic factors on foreign direct investment (FDI) inflows into Asian region before and after the COVID-19 pandemic.Design/methodology/approachThe study used the generalized method of moments (GMM) technique to examine the impact of economic growth, domestic investment and trade openness on FDI in the Asian region, in two periods from 1996 to 2018 and from 2019 to 2020.FindingsIn the pre-COVID-19 period, the estimated result shows that the economic growth, domestic investment, imports and exports positively impact FDI. In the post-COVID-19 period, the FDI is influenced by the strength of the economic characteristics of the region. The main findings indicate that economic growth has a positive and significant effect on FDI inflows into Asia. The findings also show that the economic resilience to attract FDI in Asia is significantly affected by economic growth and positively affected by trade openness and government responses during the pandemic.Originality/valueThe study suggests the Asian governments increasing the domestic investment and improving the quality of trade openness.