Impact of FDI Restrictions on Inward FDI in OECD Countries
-
Madanmohan Ghosh
,
Peter Syntetos
and
Weimin Wang
Abstract
Attracting FDI has become an integral part of the national development strategies in many economies, as it is generally believed that the benefits from foreign direct investment (FDI) outweigh its drawbacks. The UNCTAD in its World Investment Report (2006) highlights that there were 205 FDI related policy changes across the world in 2005, and most of these changes made conditions more favourable for foreign companies to enter and operate. However, FDI is still far less liberalized than trade in goods and services. Recent studies undertaken at the OECD show that although declined significantly since 1980s, barriers to inward FDI are still widespread in OECD countries. This paper explores the impact of FDI restrictions on inward FDI stocks using panel time series (1981-2004) data for 23 OECD countries. Our empirical results show that FDI restrictions do have significant impact on inward FDI stocks. The estimated short-run elasticity of inward FDI stocks with respect to FDI restrictions is in the range between –0.06 to –0.14, and the corresponding long-run elasticity is in the range between –0.64 to –1.49. This implies that by reducing barriers to FDI, countries such as Canada can significantly increase their level of inward FDI stocks.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Impact of FDI Restrictions on Inward FDI in OECD Countries
- Exchange-Rate Volatility and Industry Trade Between Japan and China
- Do Tax Havens Really Flourish?
- Financial Liberalization, Banking Crises and Economic Growth: The Case of South Mediterranean Countries
- New Evidence on the Relationship Between Economic Freedom and Growth: A Panel Cointegration Analysis for The Case of OECD
- What's New in Our World?
- Does China Still Have a Labor Cost Advantage?
- Impact of Globalization on Income Distribution Inequality in 60 Countries: Comments
- Do Immigrant Students Succeed? Evidence from Italy and France
