The Impact of the Great Recession on FDI inflow in Spain: Regional Dimension

Intensification of international capital flows in the form of foreign direct investment (FDI) over the several past decades is an evident manifestation of ongoing process of globalization. Although FDI are shown to promote economic growth, economic researchers point out that a crisis may hinder FDI flows, which consequently may hamper economic development. While there have been numerous studies on FDI and a crisis, a regional viewpoint seems to be largely neglected. Given its considerable implications for an economy and a lack of research, we consider important to explore what impact the Great Recession had on FDI in Spain by studying to what extent it changed the FDI distribution, and how it affected the determinants of FDI. To accomplish this goal, we will apply quantitative research design to analyze the variations of the dependent variable, FDI inflow, and the specified groups of 11 independent variables (macroeconomic characteristics, labor market conditions, human capital, and infrastructure) over the period of 2000-2019. The econometric analysis will include Principal Component Analysis (PCA) to reduce the dimensionality of our data. Further, we will build a random effect regression model and perform cluster analysis with the found significant variables to investigate how the composition of clusters changes between pre-crisis and post-crisis periods.