World Market Integration through the Lens of Foreign Direct Investors
The authors analyze the unparalleled increase in foreign direct investment to emerging market economies in the past 25 years. Using a large cross-country time-series data set, the authors evaluate the dependence of foreign direct investment on glob...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/05/2388824/world-market-integration-through-lens-foreign-direct-investors http://hdl.handle.net/10986/18216 |
| Summary: | The authors analyze the unparalleled
increase in foreign direct investment to emerging market
economies in the past 25 years. Using a large cross-country
time-series data set, the authors evaluate the dependence of
foreign direct investment on global factors or worldwide
sources of risk (that is, factors that drive foreign direct
investment across several countries). They construct a
globalization measure that equals the share of explained
variation in direct investment attributable to global
factors. The authors show that the globalization measure has
increased steadily for industrial and developing countries.
For the full sample of countries, the globalization measure
rose eightfold from 1985 to 1999. Furthermore, in recent
years developing countries' exposure to global factors
has approached that of industrial countries, particularly
for Latin America. Finally, the globalization measure
correlates strongly with measures of capital market
liberalization. Overall the authors find strong support for
the hypothesis of increased market integration which implies
a greater role for worldwide sources of risk. They discuss
the implications of the results for public policies
regarding capital market liberalization and policies
directed at attracting foreign investment. |
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