A system dynamics model of the impact of COVID-19 pandemic and foreign direct investment in the global supply chain

Abstract

COVID-19 pandemic is a great challenge that the world has been faced in recent decades. The pandemic has affected the global trade and has caused a dramatic fall in Foreign Direct Investments (FDI). The impact on FDI is concentrated in the countries that are severely hit by the pandemic, although negative impact of disruptions is observed in other countries. In this paper, a system dynamics model is developed to simulate the impact of the pandemic on the FDI. Results showed that the level of force majeure condition and also the level of flexibility are two important factors that impact on the FDI and other important variables of the supply chain. In the case of lower severity of pandemic and higher flexibility, FDI is higher than the case that these parameters are in their worst condition.