"Inward FDI and the quality of domestic institutions: A cross-country panel VAR analysis"

Domestic institutions are recognized as important factors in attracting foreign direct investment (FDI) and stimulating economic development in host countries. However, there is growing evidence that FDI may in turn affect and shape domestic institutions, and it is generally difficult to disentangle these two effects.

This new paper written by Roberto Antonietti (Department of Economics and Management of the University of Padua) and Jasmine Mondolo (Università Politecnica delle Marche) published in Economic Systems, seeks to shed light on this issue using comprehensive data on the quality of institutions and inward FDI in 102 countries over a 25-year period. Their results suggest that the quality of institutions plays a role in attracting FDI, but also that higher FDI inflows have a significant short-run impact on the institutional quality of recipient economies.


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