Job Market Paper
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Title: Foreign Direct Investments, Currency Derivatives and Political Uncertainty in Emerging Markets Economies
Abstract: Currency derivatives serve as a hedge against macroeconomic instability and thus can bolster investment opportunities in Emerging Markets Economies (EMEs). EMEs account for roughly 24% of the currency derivative trading in 2022, up from 20% in 2016. The growing currency derivative liquidity in EMEs can provide effective hedging solutions to market risks. Using a panel data from 1996 to 2022 for 74 EMEs, of which 30 are derivative users, this study employs a propensity score matching design to evaluate the impact of currency derivatives on foreign direct investments (FDI) in EMEs under political uncertainty. The paper argues that Multinational Corporations (MNCs) increase their overseas investments even in the face of political uncertainty as a result of a growing foreign exchange derivative turnover.
I find evidence that the availability of a currency derivative market is statistically and economically important, increasing the FDI inward in the treated group of derivative users between 1.09 and 3.45 percentage points relative to the control group. Additional findings from a linear regression analysis indicate that the availability of a currency derivative market lowers the sensitivity of FDI to political uncertainty. These findings suggest that hedging mitigates concerns of MNCs about political uncertainty and exchange rate exposure and leads to increases in FDI inward.
Journal Publications
The Impact of Vertical Theories of Harm on Investor returns: An Event Study of US Vertical Mergers (with Ralph Sonenshine). Journal of Risk and Financial Management, 2022. https://doi.org/10.3390/jrfm15070315
Abstract: The welfare implications of vertical mergers have been a subject of disagreement for decades. Similar to horizontal mergers, economists need to weigh the efficiency gains relative to the market power concerns when considering the competitive effects of vertical mergers. However, in vertical mergers, regulators are also concerned with other potential harmful effects, such as input and customer foreclosure. Using an event style technique, this paper explores these vertical theories of harm by comparing the abnormal returns of acquirers, targets, and the two combined in vertical and horizontal mergers that were challenged by regulators as potentially anticompetitive. Our results indicate that abnormal returns to targets were similar between vertical and horizontal mergers, but the gains to targets relative to acquirers were far higher in vertical versus horizontal mergers (53.6% versus 39.5%). In addition, we found that exclusionary effects have a positive impact (0.24% of the dollar abnormal return) on the bargaining position of targets. In contrast, acquirers gain 0.45% and 0.39% of the dollar abnormal return relative to targets when the antitrust concern entails collusive effects or elimination of potential competition, respectively.
Working Papers
Paper 1: First dissertation essay (2023)
International Capital Inflows, Political Risks and Political Risk Insurance in Emerging Markets and Developing Economies
Abstract: There is an abundant academic literature investigating the association between foreign direct investment (FDI) and political risks in Emerging Markets and Developing Economies (EMDEs). However, that literature has left out political risk insurance, a key variable in multinational corporations’ foreign investment decisions. The existence of political risk insurance offered by multilateral organizations (World Bank MIGA), government agencies (U.S OPIC and Export Development Canada) as well as private agencies (NEXI, AIG, Aon) allows foreign firms to hedge against political risks and is assumed to lead to more investments.
Using a panel dataset of 80 countries over the period 2000-2021, I show that insuring against political risks increases the volume of FDI inflows in EMDEs. I also find that although political risks are not determining foreign investments, there is some evidence of FDI softening in countries with higher political risks.
Paper 2: Third dissertation paper (April 2026)
Foreign Direct Investments and total factor productivity: Exploring the role of absorptive capacity
Abstract: Differences in technology and absorptive capacity between developed and developing countries are significant and account for total factor productivity differences that widen disparities in per capita income across countries. Countries that can absorb more innovations – due to strong education systems, advanced infrastructure, more investments in R&D or supportive policies— will have higher relative productivity. This paper estimates the degree to which the impact of foreign direct investment on total factor productivity depends on the absorptive capacity (AC) of the recipient economy using a panel of 93 countries over the period 1996–2018 in a system of simultaneous equations.
Given the plurality of absorptive capacity measures existing in the AC-related literature, the paper develops a novel approach to compute a multidimensional AC index to reflect the country’s overall ability to assimilate and adopt foreign technology. The paper finds evidence that absorptive capacity exerts a positive role in enabling FDI to promote productivity growth.
Works in Progress
Research Paper 1:
Title: Geoeconomic Fragmentation and the “Friendshoring” of FDI.
Abstract: Global value chains are increasingly being reshaped by geopolitical alignments, moving from a paradigm of pure efficiency to one of strategic security—a trend widely termed "friendshoring." This paper examines the drivers and patterns of geoeconomic fragmentation in foreign direct investment (FDI) from 1996 to 2022. Using a comprehensive panel of over 30 countries, we investigate whether FDI flows are increasingly pivoting away from geographic proximity and cost efficiency toward geopolitical alignment with key trade blocs. We contribute to the literature by quantifying the impact of rising geopolitical risk and the increased use of de-risking financial instruments, such as political risk insurance and FX derivatives, on FDI volatility. Our empirical results suggest that while total FDI remains resilient, its composition is undergoing a structural shift, with investment patterns favoring "geopolitical allies."
We provide robust evidence that host countries' absorptive capacity and institutional stability are becoming critical prerequisites for attracting FDI in an era of heightened fragmentation, as investors prioritize security over traditional comparative advantages.
Research Paper 2:
Title: AI Driven Foreign Direct Investments, Absorptive Capacity, and Total Factor Productivity: Evidence from Emerging Economies.
Abstract: While the impact of traditional foreign direct investment (FDI) on economic growth is well-documented, the role of Artificial Intelligence (AI)-driven FDI remains under-researched. This paper investigates whether AI-intensive FDI fosters total factor productivity (TFP) growth in emerging economies and the extent to which host-country absorptive capacity conditions this relationship. Using a multi-dimensional panel of 30+ emerging markets from 1996 to 2022, we construct an index of AI-driven investment to distinguish it from conventional capital inflows.
Our empirical findings indicate that AI-driven FDI exerts a significantly larger positive effect on TFP than traditional FDI, but this effect is highly non-linear. Specifically, the productivity-enhancing impact of AI FDI is realized only when the host country exceeds a critical threshold of human capital and technological infrastructure. These results suggest that the "AI-divide" may exacerbate global economic divergence, as the productivity benefits of frontier-technology investment remain concentrated in nations capable of effectively absorbing and integrating AI-driven innovations.