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A Clear Advantage: The Benefits of Transparency to Foreign Direct Investment

A Clear Advantage: The Benefits of Transparency to Foreign Direct Investment. By Elaine Shen and Mike Sliwinski. The Story of Vietnam. How does a country’s transparency influence the amount of FDI a country receives?. Hypothesis: increased transparency has a positive correlation to FDI

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A Clear Advantage: The Benefits of Transparency to Foreign Direct Investment

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  1. A Clear Advantage: The Benefits of Transparency to Foreign Direct Investment By Elaine Shen and Mike Sliwinski

  2. The Story of Vietnam

  3. How does a country’s transparency influence the amount of FDI a country receives? • Hypothesis: increased transparency has a positive correlation to FDI • Variables: HRV Index and FDI data • Methodology: regression analysis • Results: increasing transparency increases FDI • Theory: why transparency matters

  4. Hypothesis • Research Question: Does a country’s level of transparency affect the amount of FDI it receives? • Yes! • Strong positive relationship

  5. Factors Explanatory Variable (x) • Transparency • The HRV Index • Dependent Variable (y) • Foreign Direct Investment (BOP, constant USD)

  6. Methodology: Regressions • Controls • GDP (natural log) • GDP/capita (natural log) • GDP Growth rate (annual % change) • Exports (% GDP) • Trade Variable (imports+exports/GDP) • Real Interest Rate • Exchange Rate • Inflation (CPI) • Democracy • Natural resource dependency • Lagged FDI • Country fixed effects • Year fixed effects

  7. Greater transparency leads to greater FDI Results:

  8. Figure 1: Transparency and FDI (linear best fit)

  9. Table 1: Results

  10. But Why? • 3 Reasons • Decreases cost • Decreases risk • Investment management during crisis

  11. Conclusion • Increased transparency is positively correlated to increased FDI • Further research • Instrumental variables • Differences in differences • Significance: policy suggestions

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