Publication Date
2025
Abstract
Foreign Direct Investment (FDI) has played a crucial role in driving economic growth across Latin America, yet the determinants influencing FDI inflows in the region remain contested. This research examines the effect of macroeconomic and institutional individual factors on FDI, employing a Dynamic Panel Vector Autoregressive (PVAR) model with the Generalized Method of Moments (GMM). Our findings reveal significant temporal variations in the determinants of FDI over time. Political stability was a decisive factor during 2002–2008, reflecting investor preference for predictable institutional environments amid favorable economic conditions. The 2009–2015 period showed weakened relationships between FDI and its determinants, potentially due to the global financial crisis. Finally, the 2016–2022 period saw inflation emerge as a dominant negative factor, underscoring the growing importance of macroeconomic stability amidst modern economic challenges. The study provides valuable insights into the evolving dynamics of FDI determinants, contributing to academic discourse and policymakers in Latin America.
Disciplines
Finance and Financial Management
Recommended Citation
Flores, Daniel, "Drivers of Foreign Direct Investment in Latin America" (2025). Research Honors. 11.
https://digitalcommons.iwu.edu/all_honors/11