Do sovereign credit ratings influence foreign direct investments in OECD countries?

This paper analyzes the relationship between sovereign credit ratings and FDI flows among 29 OECD countries, which act both as donors and recipients over the period of 2005 and 2017. The results suggest that sovereign credit ratings of both donor and recipient countries are significant determinants of FDI flows. There is a positive impact of these sovereign credit ratings on the FDI flows. Secondly, the analysis showed that there is a difference between the credit ratings of the euro area and non-euro area recipients and its effect on FDI. Although better ratings attract more FDI in both cases, it matters more for non-euro area recipients rather than the euro area recipients.