In this paper, we address the question that does FDI alone affect economic growth or interaction of FDI and human capital is required to boost economic growth. We develop the model with an expanding variety of products. We estimate the model using some advanced tests utilizing data on FDI flows from developed countries. We find stronger complementary effects between FDI and human capital on the...

We estimate multivariate quantile models to measure the responses of the six main Latin American (LA) stock markets to a shock in the United States (US) stock index. We compare the regional responses with those of seven developed markets. In general, we document weaker tailcodependences between the US and LA than those between the US and the mature markets. Our results suggest possible diversif...

Despite success along some dimensions, international business cycle models have difficulty replicating several salient features of international capital flows among developed countries. In particular, net exports and current account balances are much more persistent in the data than in standard models. We account for this feature of the data with a simple onegood two-country model in which tech...

The paper investigates the impact of EMU on foreign direct investment flows. Using the option value approach to investment decisions, it is possible to show how exchange rate uncertainty hinders cross-border investment flows. By permanently fixing bilateral exchange rates, a currency union can then be expected to spur international investment. Results from a gravity model on a sample of OECD co...

For most of the postwar period, Europe’s capital markets remained largely closed to international capital flows. This paper explores the costs of this policy. Using the familiar event-study methodology, we examine the extent to which restrictions of current and capital account convertibility affected stock returns. We find that the delayed introduction of full currency convertibility increased ...

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that re...

Does official aid pave the road for private foreign investment or does it suffocate private initiative by diverting resources towards unproductive activities? In this paper we explore this question using data for a large number of developing and emerging economies. Controlling for countries‘ institutional environment, we find that, evaluated at the mean, the marginal effect of aid on private fo...