Foreign Direct Investment: Good Cholesterol?

IADB, Research Department Working Paper No. 417

46 Pages Posted: 11 Dec 2000

See all articles by Ricardo Hausmann

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB)

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2000

Abstract

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

Hausmann, Ricardo and Fernandez-Arias, Eduardo, Foreign Direct Investment: Good Cholesterol? (March 26, 2000). IADB, Research Department Working Paper No. 417, Available at SSRN: https://ssrn.com/abstract=252192 or http://dx.doi.org/10.2139/ssrn.252192

Ricardo Hausmann (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Eduardo Fernandez-Arias

Inter-American Development Bank (IDB) ( email )

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Research Department
Washington, DC 20577
United States
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