Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America

January 1, 2008

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates the role of structural reforms -financial reforms, trade liberalization, and privatization- 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.

Subject: Financial sector development, Foreign direct investment, Privatization, Structural reforms, Trade liberalization

Keywords: FDI flow, FDI inflow, WP

Pages:
38
Volume:
2008
DOI:
https://doi.org/10.5089/9781451868883.001
Issue:
026
Series:
Working Paper No. 2008/026
Stock No:
WPIEA2008026
ISBN:
9781451868883
ISSN:
1018-5941

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