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Natural resource-seeking FDI inflows and current account deficits in commodity-producing developing economies

Nathalia Rios Ballesteros () and Thomas Goda ()

Documentos de Trabajo CIEF from Universidad EAFIT

Abstract: Natural resource-seeking foreign direct investment (FDI) rose substantially during the last two decades as global commodity prices soared. This type of FDI typically is expected to improve the current accounts of recipient countries. Notwithstanding the commodity boom, however, current account balances of many commodity-producing developing economies were negative during 1995–2013. Considering 31 commodity-producing countries, we find that the average net effect of a 1% increase in natural resource-seeking FDI was a 0.23% decline in the current account (measured as percentage of GDP). This surprising result can be explained by the repatriation of profits.

Keywords: Foreign Direct Investment (FDI); net primary income (NPI); profit repatriation; current account; balance of payments; natural resources (search for similar items in EconPapers)
JEL-codes: F21 O11 O24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-int and nep-opm
Date: 2017-01-24
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