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Economic Sanction Effectiveness to Foreign Direct Investment Inflows in the Target Countries: Sanctions Onset, Macroeconomic Policy, and Political Stability

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Abstract:

Although most studies agree that the economic sanction will decrease FDI inflows in the target states, I wonder why some target states experience more FDI during the sanction. This study refutes the casual theoretical claim that economic sanctions always have a negative impact for FDI in the target countries. Instead, this study argues that economic sanction can actually increase FDI in certain conditions. Especially, I see that unexpected sanctions increase FDI in the target countries because they will observe any change in both economic and political status ex post while in certainly expected economic sanction, firms will cancel their plan or completely stop all forms of investment in the target countries. In addition, economic, financial, and political stability in the target could attract FDI although they have been sanctioned. I find that unexpected sanctions in the target increase FDI. I also confirm that healthy macroeconomic policy and higher political stability in the target countries attract more FDI although they are engaged in the economic sanction. Thus, MNCs are rational profit-maximizer, and they tend to invest to the countries that the future growth is expected, regardless of the economic sanction.
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Association:
Name: Midwest Political Science Association 67th Annual National Conference
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http://www.indiana.edu/~mpsa/


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MLA Citation:

Shin, GeiGuen. "Economic Sanction Effectiveness to Foreign Direct Investment Inflows in the Target Countries: Sanctions Onset, Macroeconomic Policy, and Political Stability" Paper presented at the annual meeting of the Midwest Political Science Association 67th Annual National Conference, The Palmer House Hilton, Chicago, IL, Apr 02, 2009 <Not Available>. 2010-03-11 <http://www.allacademic.com/meta/p362692_index.html>

APA Citation:

Shin, G. , 2009-04-02 "Economic Sanction Effectiveness to Foreign Direct Investment Inflows in the Target Countries: Sanctions Onset, Macroeconomic Policy, and Political Stability" Paper presented at the annual meeting of the Midwest Political Science Association 67th Annual National Conference, The Palmer House Hilton, Chicago, IL <Not Available>. 2010-03-11 from http://www.allacademic.com/meta/p362692_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Although most studies agree that the economic sanction will decrease FDI inflows in the target states, I wonder why some target states experience more FDI during the sanction. This study refutes the casual theoretical claim that economic sanctions always have a negative impact for FDI in the target countries. Instead, this study argues that economic sanction can actually increase FDI in certain conditions. Especially, I see that unexpected sanctions increase FDI in the target countries because they will observe any change in both economic and political status ex post while in certainly expected economic sanction, firms will cancel their plan or completely stop all forms of investment in the target countries. In addition, economic, financial, and political stability in the target could attract FDI although they have been sanctioned. I find that unexpected sanctions in the target increase FDI. I also confirm that healthy macroeconomic policy and higher political stability in the target countries attract more FDI although they are engaged in the economic sanction. Thus, MNCs are rational profit-maximizer, and they tend to invest to the countries that the future growth is expected, regardless of the economic sanction.

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