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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. A Link Between Transparency and FDI. Our research question: How does a country’s transparency influence the amount of FDI a country receives?

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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. A Link Between Transparency and FDI • Our research question: How does a country’s transparency influence the amount of FDI a country receives? • Our hypothesis: increased transparency has a positive correlation to FDI • Variables: HRV Index and FDI data • Methodology: STATA regression analysis • Results: confirm our hypothesis • Conclusion: increasing transparency increases FDI

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

  5. Factors Independent Variable (x) • Transparency • Freedom House/Heritage Foundation, newspaper circulation, fraction of WDI reported • The HRV Index • Dependent Variable (y) • Foreign Aid • GDP per capita • Foreign Direct Investment (BOP, constant USD)

  6. Methodology: Regressions • Controls • Country fixed effects • Inflation (CPI) • GDP growth rate (annual % change) • Exports (% GDP) • Imports (%GDP) • Interest rate • Exchange rate • Lag Transparency • “Diff and diff” method

  7. Greater transparency leads to greater FDI Results:

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

  9. Figure 2: Transparency and FDI (linear prediction with error bars)

  10. Table 1: Results

  11. Conclusion • Increased transparency is positively correlated to increased FDI • Causal Logic: the benefits of increased information • Further research • GDP per capita • Foreign aid • Instrumental variables • Significance: policy suggestions

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