Abstract
The present phenomena of globalization and market liberalization have attracted considerable attention from foreign investors. Several member states of the Caricom Single Market and Economy are becoming heavily dependent on foreign investments. Consequently, this study intends to investigate the effect of economic freedom on foreign portfolio investments in the case of the Caricom Single Market and Economy. For this purpose, this study has used data from 2012 to 2016. The results of the stationarity test showed that data of all variables considered in the study are stationary at level. Moreover, the fixed-effect model better modeled the data as suggested by the results of the Hausman test. Based on the results of the fixed effect models, economic freedom has a significant and positive effect on the total foreign portfolio investments. Therefore, an increase in economic freedom among the Caricom Single Market and Economy member countries will attract more investors to invest in their country stocks and debt instruments. Furthermore, for the robustness of the results, the study has also estimated a separate regression model for foreign debt portfolio investments and foreign equity portfolio investments which also support the baseline regression results and showed a significant and positive effect of economic freedom on both foreign debt and foreign equity portfolio investments. This study suggests that the member countries of the Caricom Single Market and Economy improve their economic freedom which will attract foreign investors to invest in their countries.
Highlights
The syndicated loans were considered as the sole source of private capital for firms from 1980 to the debt crisis
The Caricom Single Market and Economy (CSME) is a strategy for regional development among the member countries envisioned in the 10th meeting of conference of governments of the Caribbean community held in July 1990
The current study has mainly focused on the influence of economic freedom on the foreign portfolio investments in the Caricom Single Market and Economy (CSME)
Summary
The syndicated loans were considered as the sole source of private capital for firms from 1980 to the debt crisis. The current wave of globalization and stocks and bonds market liberalization has attracted considerable attention towards the foreign portfolio investments This focus is mainly due to the fact that countries alone cannot achieve their developmental goals. Wu, Li, and Selover (2012) examined the role of the business environment and its impact on the foreign portfolio investments Their results showed a significant and positive effect on the foreign capital inflows. The Caricom Single Market and Economy (CSME) is a strategy for regional development among the member countries envisioned in the 10th meeting of conference of governments of the Caribbean community held in July 1990 The focus of this strategy was to deepen economic integration, develop a progressive environment for globalization and trade liberalization. Increased efforts are being made to attract more foreign investments into the region
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