FDI In Brazil

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Several developing countries around the globe have lifted restrictions on foreign capital inflow since the early 1980s. Brazil undertook a significant position as recipient of foreign direct investments (FDI) in the 1990s. During the last thirty years, a great number of empirical studies focused on the role of FDI in economic growth in developing countries. However, there seems to be no agreement with regard to the direction of causality between these two variables. This study focuses on the causal effect of FDI in Brazilian’s economic growth based on an econometric study with panel data collected during the last three decades, which was a phase in which many of the development countries introduced various political, financial and economic …show more content…
They employed Industrial Production Index (IPI) as a measure of economic growth. Also, the data series was checked using augmented Dickey-Fuller (ADF) test and tested for the existence of Johansen co-integration which found that Brazil co-integrated among the selected countries at levels. The vector error correction model (VECM) was employed to study the existence of a long run relationship and the results found that growth leads FDI bi-directionally for Brazil. Although they used different methodologies than the previous studies mentioned, they arrived at similar results to Oladipo’s (2012) …show more content…
The study concluded that FDI promotes an increase in exports and also show an increase in the level of imports, particularly for those companies that practiced market-seeking strategies. It also showed that FDI causes exports in the short and long-run. Also, that FDI causes imports in the short-run, but not in the long-run. Moreover, the Granger causality test for the exports showed that FDI inflows into Brazil, actually lagged of three years, stimulated the export activity, signifying that FDI strategies do not always lead to positive externalities on the trade

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