Abigail S. Hornstein (Wesleyan University) - Economic Growth, Sentiment and Uncertainty

BOFIT Seminar - Abigail S. Hornstein (Wesleyan University) - Economic Growth, Sentiment and Uncertainty

Co-author: Balazs Zelity (Wesleyan University)

Abstract:

Prior studies have established that economic growth is often related to the level of uncertainty, both domestic and foreign, regarding the economic environment. We explore a new, related question: how is economic growth affected by foreign investors’ sentiment regarding a host market? The total value of approved foreign investment proxies investor sentiment ex ante, and the commitment ratio, the ratio of actual to approved foreign investment pledges, proxies investor sentiment ex post. This thus extends the literature on actual foreign investment flows to look at what was planned ex ante vs. what was done ex post. We plan to use a panel of East Asian destination countries who systematically disclosed data on ex ante investment approvals to explore how economic growth is affected by investor sentiment even after controlling for uncertainty. 

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