Foreign Direct Investment: Good Cholesterol?
IADB, Research Department Working Paper No. 417
46 Pages Posted: 11 Dec 2000
Date Written: March 26, 2000
This paper questions the conventional contrast between flows of "bad cholesterol", represented by short-term debt, and flows of "good cholesterol", represented by longer-term foreign direct investment. The findings suggest that high levels of FDI are not, in fact, a sign of economic good health. They often represent multinational parent companies' expansion of the boundaries of the firm in countries with inadequate capital markets. Moreover, higher levels of economic development tend to be associated with lower rather than higher shares of FDI in total capital flows.
JEL Classification: E44, F21, F23, F34, G13, G15, G32
Suggested Citation: Suggested Citation