Macroeconomic Prudence and Multinationals Investment in Latin America and Caribbean

Mumtaz Hussain Shah; Hina  Sikander

doi:10.34260/jbt.v11i01.308

Authors

Mumtaz Hussain Shah Institute of Management Studies, University of Peshawar
Hina Sikander IMS, University of Peshawar

DOI:

https://doi.org/10.34260/jbt.v11i01.308

Keywords:

FDI,, macroeconomic prudence,, development level,, trade,, market size,, human capital, Latin American and Caribbean countries

Abstract

Foreign direct investment is considered indispensible by developing nations to aid in their economic development expecting that it will ensue technology and efficiency spill overs. This research paper aims at finding the impact of macroeconomic prudence on inward FDI in Latin American and Caribbean (LAC) developing economies. Using a panel of 16 LAC states from 1990 to 2023, the results by using fixed effect estimation model proves that market size, development level and openness play a significant role in attracting multinational investment. However, human capital is found to be empirically insignificant for drawing in FDI. The key macroeconomic variables under study are also significant except interest rates. It can be concluded that inflation being a signal of macro-economic instability impedes the investment decisions of foreign multinationals; secondly stable exchange rates play a substantial role in drawing FDI and lastly higher unemployment signals weak macro-economic conditions and negatively influence MNCs.