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Foreign direct investment and output growth volatility: A worldwide analysis

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  • Ćorić, Bruno
  • Pugh, Geoff

Abstract

The decades preceding the recent financial crisis and global downturn were a period of unusually mild output volatility for many developed and developing market economies. We analyse data from 85 countries and report findings consistent with the hypothesis that foreign direct investment had a stabilising effect on output during the era of the “Great Moderation”. These findings are consistent with, but not a direct test of, the theory that relates the waning of output volatility during these decades to the international diversification of net worth and a corresponding reduction in the strength of the Financial Accelerator.

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  • Ćorić, Bruno & Pugh, Geoff, 2013. "Foreign direct investment and output growth volatility: A worldwide analysis," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 260-271.
    • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:260-271
    DOI: 10.1016/j.iref.2012.07.011
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    More about this item

    Keywords

    Foreign direct investment; GDP growth volatility; The Great Moderation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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