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Do Neighbors of Host Countries Matter to Aggregate US FDI Outflows?

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  • Francis M. Kemegue

    (Department of Economics, University of Pretoria)

Abstract

Modeling spatial interaction among contiguous host countries receiving foreign di- rect investment from the same source country is usually conceived as reflection of market seeking behaviors or cost saving strategies of firms executing location arbitrage. This paper approaches the contiguity in aggregate data from the same source country as an incentive driven process where stocks attract new flows in the neigh- borhood of the stock location. We examine the influence of geographic neighbors on new flows of FDI from the United States in 3 different clusters in the world. The results show that host country's neighbors matter to new flows of FDI, however, they also indicate that, across clusters, cross countries spillovers are associated with non- manufacturing FDI (investments in services) but not with manufacturing FDI.

Suggested Citation

  • Francis M. Kemegue, 2009. "Do Neighbors of Host Countries Matter to Aggregate US FDI Outflows?," Working Papers 200929, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:200929
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    More about this item

    Keywords

    Foreign direct investment; Spillovers; Spatial autocorrelation;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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