CLA Conable Lecture Series

The RIT CLA Conable Distinguished Lecture Series in International StudiespresentsAndrew Ojede Texas State UniversityDepartment of Finance & Economics  Thursday, October 13 3:30 – 5:00 pm Lowenthal Hall 12-3215External Macroeconomic Imbalances and FDI Inflows to Developing CountriesWe investigate the impact of risks and uncertainty associated with persistent balance of payment (BOP) crises on FDI inflows to developing countries. The size of International Monetary Fund (IMF) credit as a share of GDP is used as an instrument that signals a country facing an actual or potential BOP crisis. We find that relative size of IMF credit is negatively correlated with FDI inflows to developing countries below a threshold level of economic freedom. Above this threshold, the extent of an IMF intervention is positively correlated with FDI inflows. The main implication of these findings is that, multinational enterprises (MNEs) may view developing countries with below average index of economic freedom as lacking institutional capabilities to implement recommended IMF policy reforms when faced with an actual or potential BOP crisis. Our results are robust across alternative model specifications and consistent with the modified Mundell-Fleming model that predicts higher risk premiums as a deterrent to capital inflows.Interpreters provided upon request subject to availability.Please make your request today by going to Access.rit.edu