Expectations and the Dynamic Feedback between Foreign Direct Investment and Economic Growth

Diego Escobari and Diego Vacaflores

MPRA Paper from University Library of Munich, Germany

Abstract: This paper sets to analyze the dynamic feedback between Foreign Direct Investment (FDI) and economic growth—larger FDI promotes higher GDP, while higher GDP can be achieved with higher levels of FDI. We use panels and a sample of 19 Latin American countries to estimate a dynamic FDI and a dynamic GDP equation that jointly characterize the evolution of both variables. We find that the dynamics of GDP and FDI are mostly driven by the expectations. Shocks of GDP or FDI were found to play no role affecting the dynamics.

Keywords: Foreign Direct Investment; Economic Growth; Rational Expectations (search for similar items in EconPapers)
JEL-codes: F36 F43 O11 O47 O54 (search for similar items in EconPapers)
Date: 2014-07-17
New Economics Papers: this item is included in nep-gro and nep-opm
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Related works:
Journal Article: Expectations and the Dynamic Feedback between Foreign Direct Investment and Economic Growth (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:58657

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