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The effect of uncertainty on foreign direct investment: The case of Mexico

Author

Listed:
  • Gabriela López Noria

    (Banco de México)

  • Juan José Zamudio Fernández

    (Banco de México)

Abstract

This paper investigates the effect of uncertainty on FDI flows into the Mexican manufacturing sector during the period 2007-2015. Using a panel of manufacturing subsectors, we estimate a model by System GMM that includes domestic and external factors, as well as idiosyncratic and aggregate uncertainty measures as explicative variables. We also performsome simulations to assess the size of the uncertainty effect on FDI flows. The main results show that uncertainty discourages FDI flows into the Mexican manufacturing sector during this period. We also find that idiosyncratic uncertainty measures are more important in explaining FDI flows than aggregate uncertainty measures.

Suggested Citation

  • Gabriela López Noria & Juan José Zamudio Fernández, 2018. "The effect of uncertainty on foreign direct investment: The case of Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(1), pages 117-149.
  • Handle: RePEc:emx:esteco:v:33:y:2018:i:1:p:117-149
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    References listed on IDEAS

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    More about this item

    Keywords

    uncertainty; foreign direct investment; expectations; manufacturing;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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