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The FDI-Growth Nexus in Latin America: The Role of Source Countries and Local Conditions

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Author Info
Prüfer, P.
Tondl, G. (Tilburg University, Center for Economic Research)

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Abstract

Foreign Direct Investment (FDI) has surged in Latin America (LA) since the mid 1990s. European and North American FDI is of capital importance. We investigate the FDI-growth nexus in LA allowing for different source countries, regional hetero- geneity, interaction terms with FDI, and more than 20 growth determinants. We use Bayesian Model Averaging to address model uncertainty and to select the best mod- els and most robust parameters. The principal finding is that a positive FDI-growth nexus in LA requires a functioning legal framework and macroeconomic stability. We also find that European FDI is only indirectly correlated with productivity growth, whereas North American FDI is more robust and thus directly correlated with pro- ductivity growth.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-61.

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Date of creation: 2008
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Handle: RePEc:dgr:kubcen:200861

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Find related papers by JEL classification:
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Magnus, J.R. & Powell, O.R. & Prüfer, P., 2008. "A Comparison of Two Averaging Techniques with an Application to Growth Empirics," Discussion Paper 2008-39, Tilburg University, Center for Economic Research. [Downloadable!]
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