Analysing the determinants of US direct investment in Mexico
- 1 August 2000
- journal article
- research article
- Published by Informa UK Limited in Applied Economics
- Vol. 32 (10), 1259-1267
- https://doi.org/10.1080/000368400404416
Abstract
In this paper a simple model of foreign direct investment is developed and tested on investment flows from the USA to Mexico between 1967 and 1994 using cointegration analysis. Domestic demand and relative factor costs are found to influence direct investment flows, suggesting support for both the ‘cheap labour’ and ‘market size’ hypotheses. The short-run dynamics of the model indicate that exchange rate movements have an effect on the timing of the investment decision.Keywords
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