FDI Flow Volatility and ASEAN Members: An Exploratory Approach
The volatility of Foreign Direct Investment (FDI) flows, particularly those into ASEAN countries is well known. Still researchers will continue to use regression approaches to analyze this volatility. This paper is strictly an exploratory approach to analyzing the behavior of FDI itself and no attempt is made to design a regression model. Our approach is probabilistic in that we treat the FDI flows from home or source country to various members of ASEAN as random independent events over the time period 1999-2003. We then show how closely the random plots of FDI fit two common cumulative distribution functions (CDF), the Gumbel and the Weibull. Our approach also involves using international ISIC two-digit industry sectors from 15 to 37, from manufacture of food products and beverages to recycling. The essential thesis is that if capital markets are in a general equilibrium across hosts, home, industrial sectors, and time, then the return on capital (the marginal efficiency of capital) is equalized everywhere, and an home investor’s dollar will be randomly allocated across hosts, industrial sectors, and time. The reverse of this thesis is if FDI inflows fit a CDF, then that suggests by implication, that capital markets are in a general equilibrium.
|Date of creation:||2009|
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- Sylvia Gottschalk & Stephen Hall, 2008. "Foreign direct investment and exchange rate uncertainty in South-East Asia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 349-359.
- Michael G. PLUMMER & David CHEONG, 2009.
"Fdi Effects Of Asean Integration,"
Region et Developpement,
Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 29, pages 49-67.
- Cheong, David & Plummer, Michael, 2009. "FDI Effects of ASEAN Integration," MPRA Paper 26004, University Library of Munich, Germany.
- Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78 World Scientific Publishing Co. Pte. Ltd..
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