Exports, Foreign Investment and Growth in Latin America: Scepticism by Way of Simulation
Common sense and economic theory indicate one can have too much even of good things. This paper investigates two fundamental relationships: that export growth may stimulate or reduce growth of non-export sectors; and that foreign direct investment may â€˜crowd-inâ€™ or â€˜crowd outâ€™ domestic investors. These relationships are first considered by analysing descriptive statistics. Then, these descriptive statistics are used in a growth model. The conclusion is reached that the stimulant effect of exports and foreign direct investment varies considerably across Latin American countries. This suggests that purposeful policy can increase the benefits of both export growth and foreign investment inflows.
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