Does the US Contagion Risk Affect Foreign Direct Investment Inflows in Emerging Economies?
Contagion has been one of the most widely studied and challenging problems in recent economic research. This study aims to measure the lower-tail dependence of risk contagion between the US economy and emerging countries. Four time-varying copulas, namely Student-t, Clayton, rotated survival Gumbel, and rotated survival Joe are considered to quantify the tail dependence. Overall, the results show the contagion effects of the US economy on 18 emerging economies. The size of contagion effects gradually increases for all countries, except Thailand, the Philippines, Argentina, and Chile. Furthermore, the Granger causality test and regression analysis reveal a temporal and contemporaneous effects of contagion risk on FDI inflows in 8 out of the 18 countries.