The impact of government policies on foreign direct investment: The Canadian experience

The purpose of this paper is to identify using the framework of a statistic al model, the extent to which policy changes in Canada specifically directe d toward inward foreign direct investment [FDI] have influenced both capita l inflows to Canada and capital outflows from Canada. The paper adds to the literature concerned with how public policies targeted specifically at FDI have altered-capital inflows, and uniquely links such policies to outward direct investment (ODI). We examine specifically the effects of major polic y changes toward FDI implemented by the Canadian government over the period 1950-1995. In Canada's case, free-trade agreements (FTA and NAFTA) appear to have significantly increased levels of inward and outward foreign direct investment; however, Canada's attempt to screen FDI via the Foreign Invest ment Review Agency (FIRA) had no significant effects on either FDI or ODI.