Volatility in output growth remains a genuine concern around the globe because of its detrimental effects on growth, poverty and welfare. In the realm of output volatility, the role of FDI and its consistency is particularly important and worth considering. This article examines the role of FDI inflows and specifically the instability in it on output growth volatility using a panel dataset of 141 world economies for the period 1971–2017. The study employs a variety of estimation techniques like pooled ordinary least squares (POLS), LS fixed effects (FE), LS random effects (RE), two stage least squares (2SLS) and generalised methods of moments (GMM). Findings of the study suggest that FDI acts as the volatility reducing factor, whereas uncertainty in it increases output volatility. On the policy front, this study recommends policies that not only encourage FDI inflows but also ensure the inflows to be more consistent and stable. Our results are robust corresponding to various above-mentioned estimation techniques and sensitivity analysis.

JEL Codes: C23, E32, F21

由于其对增长、贫困和福利的不利影响，产出增长的波动仍然是全球真正关注的问题。在产出波动领域，FDI 的作用及其一致性尤为重要，值得考虑。本文使用 1971 年至 2017 年期间 141 个世界经济体的面板数据集，研究了 FDI 流入的作用，特别是它对产出增长波动的不稳定性。该研究采用了多种估计技术，如合并普通最小二乘法 (POLS)、LS 固定效应 (FE)、LS 随机效应 (RE)、两阶段最小二乘法 (2SLS) 和广义矩方法 (GMM)。研究结果表明，FDI 是降低波动性的因素，而不确定性增加了产出波动性。在政策方面，本研究建议的政策不仅要鼓励 FDI 流入，还要确保流入更加一致和稳定。我们的结果是稳健的，对应于上述各种估计技术和敏感性分析。

JEL 代码： C23、E32、F21