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Modeling FDI Flows from the USA to Canada: Two Main International Financial Variables Affect the Long-Run Economic Growth

Applied Economics and Finance

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Title Modeling FDI Flows from the USA to Canada: Two Main International Financial Variables Affect the Long-Run Economic Growth
 
Creator Mohamed, Ghada Gomaa A.
Handley-Schachler, Morrison
 
Description This paper develops a model to predict for the spillover effects of the foreign capital inflows on the long run growth under conditions of international economic exposure to foreign exchange rate fluctuations. The paper utilizes a simple open economy version of the Solow growth model with the main features of real business cycle models. In addition, the paper uses a time series model with substitution techniques to test the impact of the spillover effect of foreign capital inflows from the USA on long run growth in Canada, while controlling for exposure to foreign exchange rate fluctuations, as well as for both external and internal balances. The results support the existence of positive spillover effects from foreign direct investment on the economy. The results also show that foreign exchange rate fluctuations have weaken the impact of underlying changes in productivity on the attractiveness of the economy to overseas investors and hence moderate the overall impact of the technology spillover effect of Foreign Direct Investment (FDI) on long-run growth.
 
Publisher Redfame Publishing
 
Contributor —
 
Date 2015-10-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/aef/article/view/1094
10.11114/aef.v2i4.1094
 
Source Applied Economics and Finance; Vol 2, No 4 (2015); 85-94
2332-7308
2332-7294
 
Language eng
 
Relation http://redfame.com/journal/index.php/aef/article/view/1094/1118