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Foreign direct investment and output growth volatility: A worldwide analysis

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  • Ćorić, Bruno
  • Pugh, Geoff

Abstract

The decades preceding the recent financial crisis and global downturn were a period of unusually mild output volatility for many developed and developing market economies. We analyse data from 85 countries and report findings consistent with the hypothesis that foreign direct investment had a stabilising effect on output during the era of the “Great Moderation”. These findings are consistent with, but not a direct test of, the theory that relates the waning of output volatility during these decades to the international diversification of net worth and a corresponding reduction in the strength of the Financial Accelerator.

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  • Ćorić, Bruno & Pugh, Geoff, 2013. "Foreign direct investment and output growth volatility: A worldwide analysis," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 260-271.
  • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:260-271
    DOI: 10.1016/j.iref.2012.07.011
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    Cited by:

    1. Huang, Ho-Chuan (River) & Fang, WenShwo & Miller, Stephen M., 2014. "Does financial development volatility affect industrial growth volatility?," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 307-320.
    2. Evgeniia Kuminova & Anna Bykova, 2014. "Did relational capital matter during the financial crisis?," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 11(4), pages 286-305.
    3. Erauskin, Iñaki, 2015. "The net foreign asset position and government size," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 130-148.
    4. repec:eee:touman:v:63:y:2017:i:c:p:3-9 is not listed on IDEAS
    5. Amri, Fethi, 2016. "The relationship amongst energy consumption, foreign direct investment and output in developed and developing Countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 694-702.
    6. Suzuki, Yui, 2014. "Financial integration and consumption risk sharing and smoothing," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 585-598.
    7. repec:bla:afrdev:v:29:y:2017:i:2:p:211-222 is not listed on IDEAS

    More about this item

    Keywords

    Foreign direct investment; GDP growth volatility; The Great Moderation;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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