Financial Determinants of Direct Investment in Brazil (2003-2023): An Analysis Using ARDL Models

In most studies, Direct Investments (ID) are treated as capital purely related to productive activity, which leads to a bias in their analysis. The hypothesis of this study is that ID is also determined by financial variables, as is recognized in the case of Portfolio Investments, and the objective of this study is to test, using the ARDL approach, whether ID for Brazil show long-term relationships with financial variables. For this purpose, the variable ID in Participation in Capital excluding Reinvested Profits (IDPPEL) was used, since part of these correspond to the purchase of shares (10% or more of voting shares). The main result was the finding that DICELP showed a statistically significant and negative relationship with the volatility index VIX (liquidity preference indicator).

Keywords:
Capital flows; Direct Investment; Brazil; ARDL; Global liquidity