Output Loss from Sudden Stop of FDI and the Role of Macroeconomic Policies

Mahdi Yazdani () and Elmira Daryani ()
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Mahdi Yazdani : Faculty of Economics and Political Sciences, Shahid Beheshti University
Elmira Daryani : Faculty of Economics and Political Sciences, Shahid Beheshti University

Journal of Money and Economy, 2021, vol. 16, issue 2, 213-236

Abstract: Generally, international flows of capital and foreign direct investment attraction are challengeable issues in the literature of economic growth and development in emerging market countries. However, the fluctuations in foreign direct investment, including sudden flood and stop, will affect emerging markets' output and macroeconomic variables. Using an econometric model with unbalanced panel data during 1990-2014 for 38 emerging countries, this study tries to evaluate the determinants of output losses from the sudden stop of foreign direct investment and consider the role of macroeconomic policies. The results show that the sudden stop phenomena and the financial crises have been identified as the main explanatory variables for the output collapse in the selected countries. Moreover, the role of macroeconomic policies is important, and the output losses can be controlled by using active monetary and exchange rate policies.

Keywords: Output Losses; Sudden Flood; Sudden Stops; Financial Crises; Emerging Countries; Unbalanced Panel Data. (search for similar items in EconPapers)
JEL-codes: C23 F21 G01 (search for similar items in EconPapers)
Date: 2021
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