Foreign Direct Investment and Its Determinants in the ChileCase: An Error Correction Model Analysis, 1960-2002
AbstractThis paper examines the major economic and institutional factors underlying the surge in foreign direct investment (FDI) flows to Chile during the 1985-2002 period. It presents econometric evidence which indicates that market-based economic reforms and major changes in the institutional-legal status of foreign capital are, in large measure, responsible for the rapid increase in FDI inflows to leading sectors of the Chilean economy. Cointegration analysis and error-correction modeling suggest that market size, the real exchange rate, the debt-service ratio, the secondary enrollment ratio, physical infrastructure, and institutional reforms such as the elimination of restrictions on profit and dividend remittances and the implementation of a selective debt conversion program are economically significant in explaining the variation in FDI inflows to the country. The paper also addresses the long-term negative effects which rapidly growing profit and dividend remittances may have on the financing of capital formation and the Chilean balance of payments.
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Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 62.
Date of creation: Jun 2009
Date of revision:
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
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