Short-term and long-term cointegration analysis of foreign direct investment and value added generation in the manufacturing industry

Marcelo Leon ,María de la O. Barroso Gonzalez ,Hector Florez

doi:10.24294/jipd.v8i11.7001

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Short-term and long-term cointegration analysis of foreign direct investment and value added generation in the manufacturing industry

Marcelo Leon

María de la O. Barroso Gonzalez

Hector Florez

Journal of Infrastructure Policy and Development 2024, 8(11), 7001; https://doi.org/10.24294/jipd.v8i11.7001

Submitted：08 Jun 2024

Accepted：28 Aug 2024

Published：14 Oct 2024

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Abstract

The contraction of manufacturing economic activity in Latin American countries has been affected by the health crisis in the last few years. This phenomenon has negatively impacted the Latin American countries’ economies. In order to evaluate the impact of the manufacturing economy, this research integrates the impact of Foreign Direct Investment (FDI) on the growth of the Ecuadorian manufacturing sector, from 1981 to 2019, considering the role of the state through public spending using cointegration. The results are not consistent considering the empirical framework used; thus, FDI has a negative and significant influence on the manufacturing sector. Also, the manufacturing sector has a strong relationship with FDI in the short run and a less significant one in the long run. The results presented in this research suggest promoting domestic and FDI in the manufacturing sector, not only towards overexploited and monopolized sectors such as mining and telecommunications.

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References

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