The Impact of Foreign Trade on International Equity Investments During Global Financial Crisis and Great Lockdown Period

Countries more invest to their close trade partners and this relationship between trade and financial investments differs during the global crisis processes. This study analyzes the effect of commodity trade on bilateral equity investments and how this effect changed in the context of the 2008 Global Financial Crisis and the Great Lockdown with the gravity model. The gravity model has been estimated with the instrumental variable method to avoid the endogeneity between two flows. The results show that trade reduces equity investment. While this relationship did not change in the 2008 crisis, it is seen that the import increased the equity investments in the Covid-19 crisis.