The effect of uncertainty on foreign direct investment: The case of Mexico

  • Gabriela López Noria Banco de México
  • Juan José Zamudio Fernández Banco de México
Keywords: uncertainty, foreign direct investment, expectations, manufacturing
JEL Classification: D80, F21, D84, L60

Abstract

This paper investigates the effect of uncertainty on FDI flows into the Mexican manufacturing sector during the period 2007-2015. Using a panel of manufacturing subsectors, we estimate a model by System GMM that includes domestic and external factors, as well as idiosyncratic and aggregate uncertainty measures as explicative variables. We also performsome simulations to assess the size of the uncertainty effect on FDI flows. The main results show that uncertainty discourages FDI flows into the Mexican manufacturing sector during this period. We also find that idiosyncratic uncertainty measures are more important in explaining FDI flows than aggregate uncertainty measures.

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Published
01-01-2018
How to Cite
López NoriaG., & Zamudio FernándezJ. (2018). The effect of uncertainty on foreign direct investment: The case of Mexico. Estudios Económicos, 33(1), 117-149. https://doi.org/10.24201/ee.v33i1.355
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