Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America

Version 1 : Received: 25 August 2016 / Approved: 26 August 2016 / Online: 26 August 2016 (09:59:32 CEST)

A peer-reviewed article of this Preprint also exists.

Dal Bianco, S.; Loan, N.C.T. FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America. Int. J. Financial Stud. 2017, 5, 6. Dal Bianco, S.; Loan, N.C.T. FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America. Int. J. Financial Stud. 2017, 5, 6.

Abstract

This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI) inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through the Generalized Autoregressive Conditional Heteroscedasticity model (GARCH). Our results, obtained employing the Fixed Effects estimator, confirm the theory of hysteresis and option value, in so far it is found a statistically significant negative effect of exchange rate volatility on FDI. Price volatility, instead, turns out to be positive but insignificant. Moreover, we show that human capital and trade openness are key for attracting foreign capital. From the policy perspective, our analysis suggests the importance of stabilization policies as well as the one of government credibility in promoting trade openness and human capital formation.

Keywords

FDI; GARCH; real exchange rate and price volatility; Latin America and the Caribbean

Subject

Business, Economics and Management, Economics

Comments (0)

We encourage comments and feedback from a broad range of readers. See criteria for comments and our Diversity statement.

Leave a public comment
Send a private comment to the author(s)
* All users must log in before leaving a comment
Views 0
Downloads 0
Comments 0
Metrics 0


×
Alerts
Notify me about updates to this article or when a peer-reviewed version is published.
We use cookies on our website to ensure you get the best experience.
Read more about our cookies here.