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FDI and macroeconomic volatility: a close-up on the source countries

Listed author(s):
  • Dalila Nicet-Chenaf

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - CNRS - Université Montesquieu - Bordeaux 4)

  • Eric Rougier

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - CNRS - Université Montesquieu - Bordeaux 4)

  • Kamel Abdellah

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - CNRS - Université Montesquieu - Bordeaux 4)

Macroeconomic determinants of FDI are seldom analyzed from the perspective of source countries, priority being given to host country characteristics. In a gravity set-up, we show that output volatility of source country has a significant adverse impact on FDI flowing to developing economies that can offset the positive effect of domestic cycles. We also find that the standard positive FDI-effect of structural reforms such as trade openness is reduced by higher output volatility levels in host countries, and that FDI coming from non-traditional sources is less reactive to output instability and macroeconomic risk than FDI coming from traditional sources.

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Paper provided by HAL in its series Post-Print with number hal-00798467.

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Date of creation: 2012
Publication status: Published in Cahiers du GREThA. 2012
Handle: RePEc:hal:journl:hal-00798467
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00798467
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