IDEAS home Printed from https://ideas.repec.org/p/vuw/vuwecf/2067.html
   My bibliography  Save this paper

Can a home country benefit from FDI? A theoretical analysis

Author

Listed:
  • Chang, Chia-Ying

Abstract

The effects of outward FDI on home country’s growth remain an open question. The growth of outward FDI has renewed this attention. By allowing for endogenous decisions of firms on both whether to conduct FDI and whether to flow capital returns back to the home country, we have found several interesting results. First, as long as the probability of conducting FDI is positive, a higher proportion of entrepreneurs may harm economic growth of the home country in short-run and long-run. The ambiguous effects of transaction costs and MRS between domestic and foreign consumption on the home country’s economic growth result from the role of financial intermediaries. If the effect via inflow probability dominates, conducting FDI in a host country with a more liberalized capital account, or with a higher capital return rate may promote the home country’s economic growth rate. This is consistent with the findings in the outward FDI in European Union since 1970s.

Suggested Citation

  • Chang, Chia-Ying, 2012. "Can a home country benefit from FDI? A theoretical analysis," Working Paper Series 2067, Victoria University of Wellington, School of Economics and Finance.
  • Handle: RePEc:vuw:vuwecf:2067
    as

    Download full text from publisher

    File URL: http://researcharchive.vuw.ac.nz/handle/10063/2067
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bruno Van Pottelsberghe De La Potterie & Frank Lichtenberg, 2001. "Does Foreign Direct Investment Transfer Technology Across Borders?," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 490-497, August.
    2. Obstfeld,Maurice & Taylor,Alan M., 2005. "Global Capital Markets," Cambridge Books, Cambridge University Press, number 9780521671798, March.
    3. Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," EIJS Working Paper Series 168, Stockholm School of Economics, The European Institute of Japanese Studies.
    4. Schreft, Stacey L. & Smith, Bruce D., 1997. "Money, Banking, and Capital Formation," Journal of Economic Theory, Elsevier, vol. 73(1), pages 157-182, March.
    5. Bruce Champ & Bruce D. Smith & Stephen D. Williamson, 1996. "Currency Elasticity and Banking Panics: Theory and Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 828-864, November.
    6. Riess, Armin & Uppenberg, Kristian, 2004. "The internationalisation of production: moving plants, products, and people," EIB Papers 1/2004, European Investment Bank, Economics Department.
    7. Barry Eichengreen, 2004. "Capital Flows and Crises," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550598, January.
    8. Blomström, Magnus & Kokko, Ari, 1994. "Home Country Effects of Foreign Direct Investment: Evidence from Sweden," SSE/EFI Working Paper Series in Economics and Finance 3, Stockholm School of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    outward FDI; economic growth; capital returns; financial intermediaries;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vuw:vuwecf:2067. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services). General contact details of provider: http://edirc.repec.org/data/egvuwnz.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.