Economic freedom and foreign direct investment in Brazil: an empirical analysis of determinants and policy implications

IF 1.3 Q3 ECONOMICS

Journal of Financial Economic Policy Pub Date : 2024-04-11 DOI:10.1108/jfep-02-2024-0045

Kamal Upadhyaya, Bruno BDeGóes

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引用次数: 0

Abstract

Purpose

This paper aims to study the impact of economic freedom and some key macroeconomic variables on the foreign direct investment (FDI) inflow in Brazil.

Design/methodology/approach

An econometric model is developed that includes FDI inflow as the dependent variable and macroeconomic variables such as the output, current account balance, the real exchange rate, openness and economic freedom as explanatory variables. Annual time series data from 1995 to 2022 is used. Before carrying out the estimation, the time series properties of the data are diagnosed using unit root tests and cointegration tests. Since the data series were found to be stationary in the first difference form and the variables in the model were cointegrated, an error correction model is developed and estimated.

Findings

The findings demonstrate that the size of the market (gross domestic product), current account balance and the economic freedom index significantly influence FDI inflow to Brazil. Although the signs of openness and the real exchange rate align with theoretical expectations, they do not attain statistical significance.

Originality/value

To the best of the authors’ knowledge, this is the first formal study on the impact of economic freedom on the FDI inflow in Brazil. The finding of this study adds value to the understanding of FDI dynamics in Brazil, highlighting the critical role of economic freedom and market size in attracting foreign investment.

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巴西的经济自由和外国直接投资：对决定因素和政策影响的实证分析

本文旨在研究经济自由度和一些关键宏观经济变量对巴西外国直接投资（FDI）流入量的影响。本文建立了一个计量经济学模型，将外国直接投资流入量作为因变量，将产出、经常账户余额、实际汇率、开放度和经济自由度等宏观经济变量作为解释变量。使用的是 1995 年至 2022 年的年度时间序列数据。在进行估计之前，使用单位根检验和协整检验对数据的时间序列属性进行了诊断。研究结果表明，市场规模（国内生产总值）、经常账户余额和经济自由度指数对流入巴西的外国直接投资有显著影响。尽管开放度和实际汇率的迹象与理论预期一致，但它们在统计上并不显著。原创性/价值据作者所知，这是第一项关于经济自由对巴西外国直接投资流入影响的正式研究。本研究的发现有助于人们了解巴西的外国直接投资动态，突出了经济自由和市场规模在吸引外资方面的关键作用。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Financial Economic Policy ECONOMICS-

CiteScore

2.80

自引率

8.30%

发文量

期刊介绍： The Journal of Financial Economic Policy publishes high quality peer reviewed research on financial economic policy issues. The journal is devoted to the advancement of the understanding of the entire spectrum of financial policy and control issues and their interactions to economic phenomena. Economic and financial phenomena involve complex trade-offs and linkages between various types of risk factors and variables of interest to policy makers and market participants alike. Market participants such as economic policy makers, regulators, banking and competition supervisors, corporations and financial institutions, require timely and robust answers to the contemporary and emerging policy questions. In turn, such answers require thorough input by the academics, policy makers and practitioners alike. The Journal of Financial Economic Policy provides the forum to satisfy this need. The journal publishes and invites concise papers to enable a prompt response to current and emerging policy affairs.