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Short-term effects of COVID-19 lockdown on foreign direct investment: Evidence from Ecuadorian firms

Abstract:

We exploit the exogenous variation that comes from the COVID-19 and the subsequent lockdown in Ecuador. We estimate a regression discontinuity in time (RDiT) design using official administrative FDI data from January to May 2020. We observe an overall large decrease in FDI inflows. We assess differences across FDI sources and find stronger effects coming from capital increases compared with new firm constitutions. In addition, we find that the negative effects are mostly from inflows coming from North and South American investments. We also assess whether partial reopening of activities positively affects FDI. We do not find any significant effect.