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Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997

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  • de Boyrie Maria E

    () (New Mexico State University)

Abstract

This study attempts to determine three things: (1) whether structural changes or shifts exist in the outward foreign direct investment (FDI) data from OECD countries to eight Asian countries, (2) if a linkage exists across OECD FDI flow patterns, and (3) whether the determinants of FDI are consistently the same during the different periods as determined by structural breaks. In order to estimate the structural breaks, Bai and Perron's (1998, 2003) model is utilized because it allows for more than one break in the data. Because the time of the 19971998 Asian financial crisis is of interest, the breaks are associated with this event. The results of the principal component analysis show that the signs of the explanatory variables differ from those previously found in the literature. The correlation coefficients between FDI and trade openness, the most significant explanatory variable in the study, are positive and significant for all countries and all periods with the exception of Thailand during the pre pre-crisis period. For most of the periods studied, some sort of Granger causality seemed to exist between FDI and trade openness, mostly in the form of feedback.

Suggested Citation

  • de Boyrie Maria E, 2010. "Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997," Global Economy Journal, De Gruyter, vol. 9(4), pages 1-40, January.
  • Handle: RePEc:bpj:glecon:v:9:y:2010:i:4:n:2
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    References listed on IDEAS

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    1. Krolzig, Hans-Martin, 2001. "Business cycle measurement in the presence of structural change: international evidence," International Journal of Forecasting, Elsevier, vol. 17(3), pages 349-368.
    2. Dan Ben-David & David H. Papell, 1998. "Slowdowns And Meltdowns: Postwar Growth Evidence From 74 Countries," The Review of Economics and Statistics, MIT Press, pages 561-571.
    3. Ghosh Indradeep, 2007. "The Relation between Trade and FDI in Developing Countries -- A Panel Data Approach," Global Economy Journal, De Gruyter, vol. 7(3), pages 1-32, October.
    4. Ng, S. & Pinkse, J., 1995. "Nonparametric-two-Step Estimation of Unknown Regression Functions when the Regressors and the Regression Error Are not Independent," Cahiers de recherche 9551, Universite de Montreal, Departement de sciences economiques.
    5. Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, pages 305-323.
    6. Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249.
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    Cited by:

    1. Biswas Anindya & Mandal Biswajit & Saha Nitesh, 2014. "Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence," Global Economy Journal, De Gruyter, pages 1-13.
    2. Nikolaos Antonakakis & Gabriele Tondl, 2011. "Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian Model Averaging," FIW Working Paper series 076, FIW.

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