Natural Resource-Seeking FDI Inflows and Current Account Deficits in Commodity-Producing Developing Economies

17 Pages Posted: 2 Feb 2017

See all articles by Nathalia Rios Ballesteros

Nathalia Rios Ballesteros

Universidad EAFIT

Thomas Goda

Universidad EAFIT; Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Date Written: January 24, 2017

Abstract

Natural resource-seeking foreign direct investment (FDI) rose substantially during the last two decades as global commodity prices soared. This type of FDI typically is expected to improve the current accounts of recipient countries. Notwithstanding the commodity boom, however, current account balances of many commodity-producing developing economies were negative during 1995–2013. Considering 31 commodity-producing countries, we find that the average net effect of a 1% increase in natural resource-seeking FDI was a 0.23% decline in the current account (measured as percentage of GDP). This surprising result can be explained by the repatriation of profits.

Keywords: Foreign Direct Investment (FDI), Net Primary Income (NPI), Profit Repatriation, Current Account, Balance of Payments, Natural Resources

JEL Classification: F21, O11, O24

Suggested Citation

Rios Ballesteros, Nathalia and Goda, Thomas, Natural Resource-Seeking FDI Inflows and Current Account Deficits in Commodity-Producing Developing Economies (January 24, 2017). Center for Research in Economics and Finance (CIEF), Working Papers, No. 17-02, Available at SSRN: https://ssrn.com/abstract=2910608 or http://dx.doi.org/10.2139/ssrn.2910608

Nathalia Rios Ballesteros (Contact Author)

Universidad EAFIT ( email )

Carrera 49 N° 7 sur – 50
Bogotá, Antioquia 00000
Colombia

Thomas Goda

Universidad EAFIT ( email )

School of Economics and Finance
Carrera 49 Número 7 Sur 50
Medellín, Antioquia -
Colombia
(57) (4) 2 61 95 00 - 8664 (Phone)

HOME PAGE: http://www.eafit.edu.co

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

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