Determinants of foreign direct investment in México. An analysis of efficiency factors

Abstract

Through vector autoregressive (VAR) models, this research aims to evaluate the influence of efficiency variables (gross domestic product, trade openness, income tax, oil price, inflation, and interest rate) on the flows of foreign direct investment (FDI) in Mexico and identify actions that contribute to external financing. The results indicate that the behavior of direct foreign investment in the 1995-2020 period can be explained by an autoregressive factor of the same investment and the variables interest rate, trade openness and income tax. Therefore, the most appropriate measures to attract FDI are those that promote credit availability, better international relations, and regulated tax rates.