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ISSN: 2168-9458

Journal of Stock & Forex Trading
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Research Article

Foreign Direct Investment in Brazil: The Effects of Productivity and Aggregate Consumption

Maria Helena Ambrosio Dias1, Joilson Dias1* and Johannes Hirata2

1Graduate Program in Economics, Maringa State University, Brazil

2Hochshule Osnabrük, University of Applied Sciences, Germany

*Corresponding Author:
Joilson Dias
Graduate Program in Economics
Maringa State University, Brazil
Tel: +55 44 3011-4040
E-mail: [email protected]

Received Date: March 06, 2014; Accepted Date: May 28, 2014; Published Date: June 09, 2014

Citation: Dias MHA, Dias J, Hirata J (2014) Foreign Direct Investment in Brazil: The Effects of Productivity and Aggregate Consumption. J Stock Forex Trad 3:127. doi: 10.4172/2168-9458.1000127

Copyright: © 2014 Dias MHA, etal. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Abstract

The objective of this paper is to analyze the effects of shocks from productivity changes on the flow of foreign direct investment (FDI) to the Brazilian economy, over the period from 1992 to 2011. We hypothesize that domestic productivity increases may encourage foreign direct investment inflows, while foreign productivity increases may discourage the same, ceteris paribus. We also test if aggregate demand plays a role in attracting FDI over the long run. SVAR (Structural Vector Auto-Regression) models were estimated based on the proposed hypotheses. We did find evidence that FDI inflows into Brazil react to productivity as well as consumption variations in the directions predicted. Brazilian productivity growth attracts FDI and US productivity growth lowers FDI to Brazil. As expected, long run consumption growth generates an increase in FDI to Brazil. In sum, economic policies that foster countries’ long run productivity growth are the recommended ones to attract FDI, according to the results.

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