A look at inward foreign direct investment (FDI) transactions for Barbados

Foreign direct investment (FDI) is defined as the holdings of 10% or more of the voting stock of a foreign enterprise. It has attracted interest from developing countries because of the benefits derived in terms of the injection of foreign exchange earnings, creation of employment opportunities and the inoculation of capital and technology. Foreign exchange is the lifeblood of the Barbadian economy while employment generation leads to a higher revenue intake through taxes. With additional tax revenue, government is placed in a better position to spend more funds to improve the countryÂ’s infrastructure. The paper identifies those countries that have provided Barbados with the majority of its FDI over the years. Finally, using cointegration analysis, this paper examines the long and short run determinants of FDI inflows into Barbados for the period 1970-2003. The data indicate that in the long run, FDI is influenced by wages, prices and the investment climate, while in the short run, FDI is influenced only by wages.