Foreign Direct Investment and Output Growth Volatility: A Worldwide Analysis

40 Pages Posted: 10 Jun 2008 Last revised: 25 Aug 2012

See all articles by Bruno Coric

Bruno Coric

University of Split Faculty of Economics

Geoff T. Pugh

Staffordshire University Business School, UK

Date Written: April 4, 2011

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.

Keywords: foreign direct investment, GDP growth volatility, the 'Great Moderation'

JEL Classification: E32, F41

Suggested Citation

Coric, Bruno and Pugh, Geoff T., Foreign Direct Investment and Output Growth Volatility: A Worldwide Analysis (April 4, 2011). International Review of Economics & Finance, Vol. 25, pp. 260-271, 2013. Available at SSRN: https://ssrn.com/abstract=1143225 or http://dx.doi.org/10.2139/ssrn.1143225

Bruno Coric (Contact Author)

University of Split Faculty of Economics ( email )

Split, HR-21000
Croatia

Geoff T. Pugh

Staffordshire University Business School, UK ( email )

Leek Road
Stoke-on-Trent, ST4 2DF
United Kingdom
01782 204092 (Phone)

HOME PAGE: http://www.staffs.ac.uk/staff/profiles/gtp1.jsp

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