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Structural Economic Vulnerability, Trade Policy and FDI Inflows

Sèna Kimm Gnangnon () and Harish Iyer ()
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Sèna Kimm Gnangnon: World Trade Organization (WTO), 154 Rue de Lausanne 1211 Geneva, Switzerland
Harish Iyer: World Trade Organization (WTO), 154 Rue de Lausanne 1211 Geneva, Switzerland

Journal of International Commerce, Economics and Policy (JICEP), 2017, vol. 08, issue 01, 1-35

Abstract: This paper investigates two questions: first, how does countries' structural economic vulnerability (EVI) affect their foreign direct investment (FDI) inflows; second, how does EVI influence FDI inflows when host countries further liberalize their trade policies. The empirical analysis provides evidence that EVI influences negatively FDI inflows and that, in the context of greater trade policy liberalization, this vulnerability deters FDI only when it exceeds a certain threshold. These results call for enhanced cooperation between national governments and the international community to address developing countries, least-developed countries' EVI in order to ensure greater FDI inflows, which are critical for their economic development.

Keywords: Structural economic vulnerability; trade policy liberalization; foreign direct investment inflows (search for similar items in EconPapers)
Date: 2017
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