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FDI and macroeconomic volatility: A close-up on the source countries

Kamel Abdellah, Dalila Nicet-Chenaf and Eric Rougier
Authors registered in the RePEc Author Service: Dalila Nicet - Chenaf ()

Cahiers du GREThA (2007-2019) from Groupe de Recherche en Economie Théorique et Appliquée (GREThA)

Abstract: Macroeconomic determinants of FDI are seldom analyzed from the perspective of source countries, priority being given to host country characteristics. In a gravity set-up, we show that output volatility of source country has a significant adverse impact on FDI flowing to developing economies that can offset the positive effect of domestic cycles. We also find that the standard positive FDI-effect of structural reforms such as trade openness is reduced by higher output volatility levels in host countries, and that FDI coming from non-traditional sources is less reactive to output instability and macroeconomic risk than FDI coming from traditional sources.

Keywords: Output volatility; Inflation; FDI; gravity model; source countries; European Union; Middle East and North Africa (search for similar items in EconPapers)
JEL-codes: C23 C24 F15 F21 F31 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mac
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Working Paper: FDI and macroeconomic volatility: a close-up on the source countries (2012)
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