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The Role of Economic Contagion in the Inward Investment of Emerging Economies: The Dynamic Conditional Copula Approach

Paravee Maneejuk () and Woraphon Yamaka ()
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Paravee Maneejuk: Center of Excellence in Econometrics, Chiang Mai University, Chiang Mai 50200, Thailand
Woraphon Yamaka: Center of Excellence in Econometrics, Chiang Mai University, Chiang Mai 50200, Thailand

Mathematics, 2021, vol. 9, issue 20, 1-23

Abstract: Contagion has been one of the most widely studied and challenging problems in recent economic research. This paper aims at capturing the main impact of contagion risk of the U.S. on foreign direct investment inflows in 18 emerging countries. To quantify the degree of contagion, the time-varying tail dependence copula is employed. Then, the Granger causality test and time series regression analysis are used to investigate the temporal and contemporaneous effects of contagion risk on investment inflows, respectively. Overall, the results confirm the time-varying contagion effects of the U.S. economy on 18 emerging economies. The size of contagion effects gradually increases for all countries, except Thailand, the Philippines, Argentina, and Chile. Furthermore, the results of the Granger causality test and regression reveal that temporal and contemporaneous effects of contagion risk on investment inflows exist in 8 out of 18 countries.

Keywords: contagion risk; copula; emerging economies; foreign direct investment; tail dependence; U.S. economy (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
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