02076cas a2200241 a 4500 AALejournalIMF009242 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451866438 1018-5941 BD-DhAAL BD-DhAAL Elo, Kinga. The Effect of Capital Controlson Foreign Direct Investment Decisions Under Country Risk with Intangible Assets / Kinga Elo. Washington, D.C. : International Monetary Fund, 2007. 1 online resource (62 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper examines how capital controls affect FDI decisions and how the impact of these restrictive measures varies with different levels of country risk. We construct a model of firms' FDI decisions, broadly in Dunning's "eclectic theory" framework, using "real options" to emphasize economic uncertainty and country risk. Numerical results of the model take the form of "quality statistics" that uncover the underlying dynamics hidden in the aggregate data that is responsible for the low performance of recent empirical studies. We find that increasing levels of capital controls reduce the life-span of FDI investments at each level of country risk and foreign investors' willingness towards risk sharing increases. We reveal a significant interaction between capital control and country risk, resulting in a nonlinear relationship between these and the volatility and volume statistics. We estimate a standard cross-sectional model that provides strong support for our theoretical findings. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2007/079 Full text available on IMF http://elibrary.imf.org/view/journals/001/2007/079/001.2007.issue-079-en.xml IMF e-Library