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U.S. Direct Investment To Mexico: Politics, Economics, And Nafta

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  • GUY V.G. STEVENS

Abstract

The goal of this paper is to determine whether the recent opening of the Mexican economy caused a significant change in the investment behavior of U.S. multinational firms. The first finding is that a real investment function that explained the data well through 1989 shifted dramatically thereafter. Tests indicate that the probable causes of this shift were (i) the relaxation of Mexican restrictions on direct investment after 1989 and (ii) anticipatory investment behavior after the positive conclusion of the NAFTA negotiations.

Suggested Citation

  • Guy V.G. Stevens, 1998. "U.S. Direct Investment To Mexico: Politics, Economics, And Nafta," Contemporary Economic Policy, Western Economic Association International, vol. 16(2), pages 197-210, April.
    • Handle: RePEc:bla:coecpo:v:16:y:1998:i:2:p:197-210
    DOI: 10.1111/j.1465-7287.1998.tb00512.x
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    1. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January.
    2. Stevens, Guy V. G. & Lipsey, Robert E., 1992. "Interactions between domestic and foreign investment," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 40-62, February.
    3. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    4. Tinsley, P A, 1971. "A Variable Adjustment Model of Labor Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 12(3), pages 482-510, October.
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    1. repec:ebl:ecbull:v:6:y:2008:i:47:p:1-7 is not listed on IDEAS
    2. Esmael Adibi & James Doti, 2001. "The impact of NAFTA on California exports," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(1), pages 159-166, February.
    3. Stevens, Guy V. G., 2000. "Politics, economics and investment:: Explaining plant and equipment spending by US direct investors in Argentina, Brazil and Mexico," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 153-183, April.
    4. Yu-Ter Wang, 2008. "Outward FDI from a Free Trade Area: the Small Open Economy Case," Economics Bulletin, AccessEcon, vol. 6(47), pages 1-7.

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