Horst Raff, Michael Ryan and Frank Stähler
In: Journal of International Economics, Vol. 112, pp 109 – 122
Using Japanese microdata for the period 1980 to 2000 Raff et al. find evidence for two transmission channels from financial shocks to foreign direct investment: a collateral channel, whereby changes in the value of investors’ landholdings affect their borrowing ability; and a lending channel, whereby changes in bank health affect banks’ lending ability.