Working Paper: CEPR ID: DP6690
Authors: Nauro F. Campos; Yuko Kinoshita
Abstract: This paper investigates the role of structural reforms ?privatization, financial reform and trade liberalization? as determinants of FDI inflows based on newly constructed dataset on structural reforms for 19 Latin American and 25 Eastern European countries between 1989 and 2004. Our main finding is a strong empirical relationship from reforms to FDI, in particular, from financial liberalization and privatization. These results are robust to different measures of reforms, split samples, and potential endogeneity and omitted variables biases.
Keywords: Financial Reform; Foreign Direct Investment; Latin America; Privatization; Trade Liberalization; Transition Economies
JEL Codes: F21; H11; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structural reforms (E69) | FDI inflows (F21) |
| financial liberalization (F30) | FDI inflows (F21) |
| privatization (L33) | FDI inflows (F21) |
| improved bank efficiency (G21) | FDI inflows (F21) |
| macroeconomic stability (E60) | FDI inflows (F21) |
| economic development (O29) | FDI inflows (F21) |
| institutional quality (L15) | FDI inflows (F21) |
| FDI (F23) | financial liberalization (F30) |