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Openness and Growth: Re-Examining Foreign Direct Investment, Trade and Output Linkages in Latin America

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  • Ana Cuadros
  • Vicente Orts
  • Maite Alguacil

Abstract

The openness-growth connection is still an open question in the empirical literature. Although some studies have found that openness has a positive impact on economic performance, others have seriously questioned the significance of this result. The main point that we try to emphasise in this paper is that openness involves more than just trade liberalisation. The increasing importance of international capital flows and especially foreign direct investment (FDI) seems to be another relevant component of outward oriented policies. Therefore, by using quarterly data from the late seventies to 2000, we investigate the effects of liberalisation in Mexico, Brazil and Argentina by taking into account trade and FDI growth links. The results suggest that it is important to consider both exports and FDI to ascertain the benefits associated to the outward oriented strategies followed by these countries.

Suggested Citation

  • Ana Cuadros & Vicente Orts & Maite Alguacil, 2004. "Openness and Growth: Re-Examining Foreign Direct Investment, Trade and Output Linkages in Latin America," Journal of Development Studies, Taylor & Francis Journals, vol. 40(4), pages 167-192.
  • Handle: RePEc:taf:jdevst:v:40:y:2004:i:4:p:167-192
    DOI: 10.1080/00220380410001673238
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    References listed on IDEAS

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    1. Linda S. Goldberg & Michael W. Klein, 1999. "International trade and factor mobility: an empirical investigation," Staff Reports 81, Federal Reserve Bank of New York.
    2. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    3. Judith A. Giles & Sadaf Mirza, 1999. "Some Pretesting Issues on Testing for Granger Noncausality," Econometrics Working Papers 9914, Department of Economics, University of Victoria.
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