Fidel Pérez Sebastián
Sovereign risk, FDI spillovers, and growth
Sebastián, Fidel Pérez; Maliar, Lilia; Maliar, Serguei
Authors
Lilia Maliar
Serguei Maliar
Abstract
This paper studies the effect of sovereign risk on capital flows from rich to poor nations in the context of a two-country model, where Foreign Direct Investment (FDI) creates positive externalities in domestic production. We show that if externalities are large, a developing country never expropriates foreign assets, and behaves as under perfect enforcement of foreigners' property rights, jumping to the steady state in one period. If externalities are absent, a developing country always expropriates foreign assets and, then, there are no capital flows in equilibrium, as occurs in autarky. If externalities are of a medium size, our model can account for scarce capital flows from rich to poor nations, as well as other key features of the data, such as rising-over-time patterns of foreign capital and FDI in developing countries. In addition, the model offers an economic rationale for the FDI restrictions observed across nations. Copyright ? 2008 The Authors. Journal compilation ? 2008 Blackwell Publishing Ltd.
Citation
Sebastián, F. P., Maliar, L., & Maliar, S. (2008). Sovereign risk, FDI spillovers, and growth. Review of International Economics, 16(3), 463-477. doi:10.1111/j.1467-9396.2007.00718.x
Journal Article Type | Article |
---|---|
Acceptance Date | Jan 1, 2008 |
Online Publication Date | Mar 3, 2008 |
Publication Date | 2008-08 |
Deposit Date | Nov 13, 2014 |
Journal | Review Of International Economics |
Print ISSN | 0965-7576 |
Electronic ISSN | 1467-9396 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 16 |
Issue | 3 |
Pages | 463-477 |
DOI | https://doi.org/10.1111/j.1467-9396.2007.00718.x |
Keywords | Geography, Planning and Development; Development |
Public URL | https://hull-repository.worktribe.com/output/469576 |
Publisher URL | https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-9396.2007.00718.x |
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