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Competition between Latin America and China for US direct investment

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  • De la Cruz Gallegos, Jose Luis
  • Ivanova Boncheva, Antonina
  • Ruiz-Porras, Antonio

Abstract

There is a belief that the Chinese economy competes with the Latin-American ones for investment flows. Here we analyze the determinants of the US FDI outflows to the most representative Latin-American economies. We develop such assessment with a double-procedure cointegration analysis based on the time-series methodologies of Toda and Yamamoto (1995) and Liu, Song and Romilly (1997). The results suggest that long-run investment to the Latin-American region mainly depends on the performance of the US economy. Furthermore, they suggest the existence of a substitution effect between the Latin American countries and China for US investment flows.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8950.

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Date of creation: 01 Feb 2008
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Handle: RePEc:pra:mprapa:8950

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Keywords: FDI; Latin America; China; US; Cointegration;

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  1. Eichengreen, Barry & Tong, Hui, 2007. "Is China's FDI coming at the expense of other countries?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 153-172, June.
  2. Awokuse, Titus O., 2002. "Is The Export-Lead Growth Hypothesis Valid For Canada?," Staff Papers 15823, University of Delaware, Department of Food and Resource Economics.
  3. Alicia García-Herrero & Daniel Santabárbara, 2005. "Does China have an impact on foreign direct investment to Latin America?," Banco de Espa�a Working Papers 0517, Banco de Espa�a.
  4. Quintos, Carmela E., 1998. "Stability tests in error correction models," Journal of Econometrics, Elsevier, vol. 82(2), pages 289-315, February.
  5. Eduardo Lora, 2005. "Should Latin America Fear China?," Research Department Publications 4419, Inter-American Development Bank, Research Department.
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  7. Ana María Cuadros Ramos, 2000. "Exportaciones y crecimiento económico: Un análisis de causalidad para México," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 15(1), pages 37-64.
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  13. Cravino, Javier & Lederman, Daniel & Olarreaga, Marcelo, 2007. "Foreign direct investment in Latin America during the emergence of China and India : stylized facts," Policy Research Working Paper Series 4360, The World Bank.
  14. Xiaming Liu & Haiyan Song & Peter Romilly, 1997. "An empirical investigation of the causal relationship between openness and economic growth in China," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1679-1686.
  15. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  16. repec:idb:brikps:8551 is not listed on IDEAS
  17. McMillin, W Douglas, 1988. "Money Growth Volatility and the Macroeconomy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 319-35, August.
  18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  19. Xiaohui Liu & Peter Burridge & P. J. N. Sinclair, 2002. "Relationships between economic growth, foreign direct investment and trade: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1433-1440.
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