Advertisement

FDI, growth and trade partisan conflict in the US: TVP-BVAR approach

  • Yifei CaiEmail author
  • Angeliki Menegaki
Article
  • 7 Downloads

Abstract

This paper utilizes time-varying parameters Bayesian vector auto-regression model with stochastic volatility approach to investigate the time-varying dynamic relation between FDI, growth and trade partisan conflict in the US. The empirical results confirm that an increase in trade partisan conflict will deter FDI inflows to the US and discourage economic activities. Besides, we also examine the responses of equity investment, intra-company loans and reinvestment earnings given trade partisan conflict shock. In a robustness check, we consider different measurements on FDI and other control variables. The negative role of a trade partisan conflict shock is not altered, indicating the robustness of the findings. Moreover, trade partisan conflicts like GATT, Omnibus Bill Veto, NAFTA, Bush versus Kerry, the financial crisis and TPP are key factors which affect the dynamics. The US government should remedy the negative impacts of trade policy conflict on FDI inflows and economic growth.

Keywords

Trade partisan conflict FDI Growth Time-varying Bayesian VAR 

Abbreviations

GATT

General Agreement on Tariffs and Trade

NAFTA

North American Free Trade Agreement

TPP

Trans-Pacific Partnership

JEL Classification

C11 E62 F21 F3 

Notes

References

  1. Adkins LC, Moomaw RL, Savvides A (2002) Institutions, freedom, and technical efficiency. South Econ J 69(1):92–108. https://doi.org/10.2307/1061558 CrossRefGoogle Scholar
  2. Alhakimi SS, Peoples J (2009) Foreign direct investment and domestic wages in the usa. Manch. Sch. 77(1):47–64CrossRefGoogle Scholar
  3. Arminen H, Menegaki AN (2019) Corruption, climate and the energy-environment-growth nexus. Energy Econ 80:621–634CrossRefGoogle Scholar
  4. Azzimonti M (2016) Does partisan conflict deter fdi inflows to the us? Technical report, National Bureau of Economic ResearchGoogle Scholar
  5. Azzimonti M (2018a) Partisan conflict and private investment. J Monet Econ 93:114–131CrossRefGoogle Scholar
  6. Azzimonti M (2018b) The politics of fdi expropriation. Int Econ Rev 59(2):479–510CrossRefGoogle Scholar
  7. Azzimonti M (2019) Does partisan conflict deter fdi inflows to the us? J Int Econ 120(C):162–178CrossRefGoogle Scholar
  8. Azzimonti M, Talbert M (2014) Polarized business cycles. J Monet Econ 67:47–61CrossRefGoogle Scholar
  9. Baker SR, Bloom N, Davis SJ (2016) Measuring economic policy uncertainty. Q J Econ 131(4):1593–1636CrossRefGoogle Scholar
  10. Balcilar M, Akadiri SS, Gupta R, Miller SM (2018) Partisan conflict and income inequality in the united states: A nonparametric causality-in-quantiles approach. Soc Indic Res 142:1–18Google Scholar
  11. Bastiaens I (2016) The politics of foreign direct investment in authoritarian regimes. Int Interact 42(1):140–171CrossRefGoogle Scholar
  12. Busse M, Hefeker C (2007) Political risk, institutions and foreign direct investment. Eur J Polit Econ 23(2):397–415CrossRefGoogle Scholar
  13. Büthe T, Milner HV (2008) The politics of foreign direct investment into developing countries: increasing fdi through international trade agreements? Am J Polit Sci 52(4):741–762CrossRefGoogle Scholar
  14. Caldara D, Iacoviello M (2018) Measuring geopolitical risk. FRB International Finance Discussion Paper (1222)Google Scholar
  15. Canova F, Ciccarelli M (2009) Estimating multicountry var models. Int Econ Rev 50(3):929–959CrossRefGoogle Scholar
  16. Coan TG, Kugler T (2008) The politics of foreign direct investment: an interactive framework. Int Interact 34(4):402–422CrossRefGoogle Scholar
  17. Cogley T, Sargent TJ (2005) Drifts and volatilities: monetary policies and outcomes in the post wwii us. Rev Econ Dyn 8(2):262–302CrossRefGoogle Scholar
  18. Creal DD, Wu JC (2017) Monetary policy uncertainty and economic fluctuations. Int Econ Rev 58(4):1317–1354CrossRefGoogle Scholar
  19. Driffield N, Karoglou M (2019) Brexit and foreign investment in the UK. J R Stat Soc Ser A Stat Soc 182(2):559–582CrossRefGoogle Scholar
  20. Dunning JH (1973) The determinants of international production. Oxf Econ Papers 25(3):289–336CrossRefGoogle Scholar
  21. Dunning JH (1980) Toward an eclectic theory of international production: some empirical tests. J Int Bus Stud 11(1):9–31CrossRefGoogle Scholar
  22. Franta M, Horváth R, Rusnak M (2014) Evaluating changes in the monetary transmission mechanism in the Czech Republic. Empir Econ 46(3):827–842CrossRefGoogle Scholar
  23. Fry R, Pagan A (2011) Sign restrictions in structural vector autoregressions: a critical review. J Econ Lit 49(4):938–60CrossRefGoogle Scholar
  24. Ghazalian PL, Amponsem F (2018) The effects of economic freedom on fdi inflows: an empirical analysis. Appl Econ 51:1–22Google Scholar
  25. Gulen H, Ion M (2015) Policy uncertainty and corporate investment. Rev Financ Stud 29(3):523–564Google Scholar
  26. Gupta R, Pierdzioch C, Selmi R, Wohar ME (2018) Does partisan conflict predict a reduction in us stock market (realized) volatility? Evidence from a quantile-on-quantile regression model. North Am J Econ Fin 43:87–96CrossRefGoogle Scholar
  27. Hajko V, Sebri M, Al-Saidi M, Balsalobre-Lorente D (2018) The energy-growth nexus: history, development, and new challenges. In: The economics and econometrics of the energy-growth Nexus, Elsevier, pp 1–46Google Scholar
  28. Handley K, Limão N (2017) Policy uncertainty, trade, and welfare: theory and evidence for china and the united states. Am Econ Rev 107(9):2731–83CrossRefGoogle Scholar
  29. Hartzmark SM (2016) Economic uncertainty and interest rates. Rev Asset Pricing Stud 6(2):179–220CrossRefGoogle Scholar
  30. Helpman E (1984) A simple theory of international trade with multinational corporations. J Polit Econ 92(3):451–471CrossRefGoogle Scholar
  31. Husted L, Rogers JH, Sun B (2017) Monetary policy uncertainty. FRB International Finance Discussion Paper (1215)Google Scholar
  32. Inglesi-Lotz R (2018) The role of potential factors/actors and regime switching modeling. In: The economics and econometrics of the energy-growth nexus, Elsevier, pp 113–139Google Scholar
  33. Jiang X, Shi Y (2018) Does us partisan conflict affect US–China bilateral trade? Int Rev Econ Fin  https://doi.org/10.1016/j.iref.2018.12.005
  34. Kirchner M, Cimadomo J, Hauptmeier S (2010) Transmission of government spending shocks in the euro area: time variation and driving forcesGoogle Scholar
  35. Krugman P, Venables AJ (1995) Globalization and the inequality of nations. Q J Econ 110(4):857–880CrossRefGoogle Scholar
  36. Li Q, Resnick A (2003) Reversal of fortunes: democratic institutions and foreign direct investment inflows to developing countries. Int Org 57(1):175–211CrossRefGoogle Scholar
  37. Lucas RE (1990) Why doesn’t capital flow from rich to poor countries? Am Econ Rev 80(2):92–96Google Scholar
  38. Markusen JR (1984) Multinationals, multi-plant economies, and the gains from trade. J Int Econ 16(3–4):205–226CrossRefGoogle Scholar
  39. Mayer M, Kenter R, Morris JC (2015) Partisan politics or public-health need? An empirical analysis of state choice during initial implementation of the affordable care act. Polit Life Sci 34(2):44–51CrossRefGoogle Scholar
  40. Menegaki A (2018) The economics and econometrics of the energy-growth nexus. Academic Press, LondonGoogle Scholar
  41. Mishra BR, Jena PK (2019) Bilateral fdi flows in four major asian economies: a gravity model analysis. J Econ Stud 46(1):71–89CrossRefGoogle Scholar
  42. Ohlin B (1952) Interregional and international trade, vol 39. Harvard University Press, CambridgeGoogle Scholar
  43. Owen E (2015) The political power of organized labor and the politics of foreign direct investment in developed democracies. Comp Polit Stud 48(13):1746–1780CrossRefGoogle Scholar
  44. Primiceri GE (2005) Time varying structural vector autoregressions and monetary policy. Rev Econ Stud 72(3):821–852CrossRefGoogle Scholar
  45. Rodrik D, Subramanian A, Trebbi F (2004) Institutions rule: the primacy of institutions over geography and integration in economic development. J Econ Growth 9(2):131–165CrossRefGoogle Scholar
  46. Sommer J (2017) Trump immigration crackdown is great for private prison stocks. The New York TimesGoogle Scholar
  47. Stock JH, Watson MW (1996) Evidence on structural instability in macroeconomic time series relations. J Bus Econ Stat 14(1):11–30Google Scholar
  48. Zhou J, Latorre MC (2014) The impact of foreign direct investment on the production networks between China and East Asia and the role of the USA and the rest of the world as final markets. Global Econ Rev 43(3):285–314CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Ecconomics, Business SchoolThe University of Western AustraliaPerthAustralia
  2. 2.Department of Economics and Management of Tourist UnitsAgricultural University of AthensAmfissaGreece
  3. 3.Hellenic Open UniversityPatrasGreece
  4. 4.Open University of CyprusNicosiaCyprus

Personalised recommendations