with Yuko Kinoshita
Forthcoming IMF Staff Papers
May 2009
The relationship between structural reforms and foreign direct investment
inflows (FDI) is complex because different reforms
have different impacts and because their complementarities have important
yet imperfectly understood effects on FDI inflows.
The objective of this paper is to try to extricate these effects, focusing
on the dynamics of privatization, trade and financial
liberalization in a large yearly panel of developing countries (Latin America
and transition economies) for 1989-2004. Our
main finding is of a strong relationship from reforms to FDI and, in particular,
from financial liberalization. We subject our results
to various sensitivity tests and find they are robust to different measures
of reforms, split samples, panel estimators
(fixed-effects, system GMM, and differences-in-differences), and endogeneity
and omitted variables concerns.
Download paper: August 2008 REVISION
January 2008 version
IZA DP 3332
CEPR DP
6690
IMF
WP 08/26 WDI
DP 906
Featured in VOX
and in imf.org 's "News,
Views and Commentaries Column" (now with the cheeky title)