Msc-thesis-gvar-fdi

Msc thesis exploring U.S. FDI effects on macro indicators in 16 countries through Global VAR modelling (GVAR, GIRF)

MSc Thesis – Foreign Direct Investment Impact on Economic Growth (GVAR Approach)

Final thesis submitted for the MSc in Economics and Finance at Ca’ Foscari University of Venice (AY 2021/2022).
Author: Francesco Mosti
Supervisor: Prof. Davide Raggi

Abstract

This thesis investigates the impact of U.S. Foreign Direct Investment (FDI) outflows on key macroeconomic indicators of major host countries over the period 2000Q1–2019Q4.
Using the Global Vector Autoregressive (GVAR) framework developed by Pesaran et al. (2004), the model captures both bilateral and third-country spillover effects.

Key indicators analyzed:

• Real GDP
• Trade balance
• Unemployment rate
• R&D intensity (% of GDP)

Shock responses are evaluated through Generalised Impulse Response Functions (GIRF), showing significant heterogeneity across regions and variable types.

Methodology

• Model: GVAR, built via VARX* country blocks
• Estimation: MATLAB, GVAR Toolbox by Smith and Galesi (2014)
• Shocks: 1 standard error increase in U.S. outward FDI
• Analysis: both bilateral and third-country effects
• Data: BEA, OECD, FRED, World Bank (2000–2019, quarterly)
• Graphs and data analysis: R

Key Findings

• China, UK and Canada benefit significantly in trade balance after FDI shocks
• R&D spillovers are observable (positive in China, negative in the U.S.)
• Mixed labor market responses: Korea improves, Mexico and Canada worsens possibly related to NAFTA
• Little effect on Real GDP short-term growth

Files

• Thesis_FrancescoMosti_2022.pdf: Full thesis (GVAR model, results, discussion)
• Presentation_Mosti.pdf: Summary slides used during defense (optional)

Contact

Feel free to reach out via LinkedIn or email me (francesco.mosti@yahoo.com) for questions or collaborations.