Structural Reforms, Financial Liberalization and Foreign Direct Investment

        with Yuko Kinoshita

        Published in  IMF Staff Papers 57 (2): 326-365, 2010  (PDF)

        The relationship between structural reforms and foreign direct investment inflows (FDI) is complex because different reforms
        have different impacts and because their complementarities have important yet imperfectly understood effects on FDI inflows.
        The objective of this paper is to try to extricate these effects, focusing on the dynamics of privatization, trade and financial
        liberalization in a large yearly panel of developing countries (Latin America and transition economies) for 1989-2004. Our
        main finding is of a strong relationship from reforms to FDI and, in particular, from financial liberalization. We subject our results
        to various sensitivity tests and find they are robust to different measures of reforms, split samples, panel estimators
        (fixed-effects, system GMM, and differences-in-differences), and endogeneity and omitted variables concerns.
 

         Download paper:                 August 2008 REVISION

         January 2008 version          IZA DP 3332         CEPR DP 6690           IMF WP 08/26          WDI DP 906
 

         Featured in VOX and in imf.org 's "News, Views and Commentaries Column" (now with the cheeky title)
 
 
 

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