Modelling the Impact of FDI on Growth in a Global Vector Autoregressive Framework
Type Research Project
- Austrian National Bank
Duration Aug. 1, 2015 - Oct. 31, 2017
- Institute for Economic Geography and GIScience IN (Details)
Tags
Press 'enter' for creating the tagAbstract (German)
This project uses a global vector autoregressive (GVAR) model to analyze the relationship between FDI inflows and output dynamics in a multi-country context.The GVAR model enables us to make two important contributions: First, to model international linkages among a large number of countries, which is a key asset given the diversity of countries involved, and second, to model foreign direct investment and output dynamics jointly. The country-specific small-dimensional vector autoregressive submodels are estimated utilizing a Bayesian version of the model coupled with stochastic search variable selection priors to account for model uncertainty. Using a sample of 15 emerging and advanced economies over the period 1998:Q1 to 2012:Q4, we find that US outbound FDI exerts a positive long-term effect on output. Asian and Latin American economies tend to react faster and also stronger than Western European countries. Forecast error variance decompositions indicate that FDI plays a prominent role in explaining GDP fluctuations, especially in emerging market economies.
Abstract (English)
This project uses a global vector autoregressive (GVAR) model to analyze the relationship between FDI inflows and output dynamics in a multi-country context.The GVAR model enables us to make two important contributions: First, to model international linkages among a large number of countries, which is a key asset given the diversity of countries involved, and second, to model foreign direct investment and output dynamics jointly. The country-specific small-dimensional vector autoregressive submodels are estimated utilizing a Bayesian version of the model coupled with stochastic search variable selection priors to account for model uncertainty. Using a sample of 15 emerging and advanced economies over the period 1998:Q1 to 2012:Q4, we find that US outbound FDI exerts a positive long-term effect on output. Asian and Latin American economies tend to react faster and also stronger than Western European countries. Forecast error variance decompositions indicate that FDI plays a prominent role in explaining GDP fluctuations, especially in emerging market economies.
Publications
Classification
- 5371 Macroeconomics (Details)