Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167823
Authors: 
Dal Bianco, Silvia
Nguyen, Cong To Loan
Year of Publication: 
2017
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 5 [Year:] 2017 [Issue:] 1 [Pages:] 1-17
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 as a statistically significant negative effect of exchange rate volatility on FDI is found. 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 policy of government credibility in promoting trade openness and human capital formation.
Subjects: 
FDI
GARCH
real exchange rate and price volatility
Latin America and the Caribbean
JEL: 
C33
F21
F23
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

Files in This Item:
File
Size
257.72 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.