Uncertainty, Financial Development and FDI Inflows: France Evidence

Abstract

The economic policy and world uncertainties are negatively effects on the whole economy, specifically on the financial sector of France. The outbreak of corona virus in the last quarter of 2019 makes the situation worst, specifically for the case of France. The outbreak of this virus results in a drastic reduction in liquidity and solvency of French corporations. The inflows of foreign direct investment (FDI) in France are also reduced by 17% during the outbreak of virus. However, after analyzing the situation of world uncertainty and economic policy uncertainty in France, it is found to be crucial to examine the role of economic policy and world uncertainties in defining FDI and financial development. Present study thus attempts to investigate the impact of economic policy uncertainty and world uncertainty on FDI and financial development in France. For this purpose, the study collects the data for the period of 1997-2018 from different secondary data sources. The study applied ARDL bound testing approach to estimate the results. Findings report negative impact of economic policy uncertainty and world uncertainty on FDI and financial development. The study suggests the France government to monitor the sources and size of uncertainty shock while formulating different economic policies.