Foreign direct investment, exports and domestic performance in Mexico: a causality analysis

Most empirical work on the effects of outward-oriented policies in developing countries has identified openness with trade. However, openness involves much more than just trade. This paper analyses the relationship among trade, foreign direct investment and domestic income in Mexico during the period 1980.I to 1999.IV. On the basis of the Granger non-causality procedure recently developed by Toda and Yamamoto [Journal of Econometrics 66 (1995) 225] and Dolado and Lütkepohl [Econometric Review 15 (1996) 369], the results support the effectiveness of the outward-looking orientation policy in this country.