The Empirical Determinants of Foreign Direct

Policy Research Working Papers, 1999

WSEAS transactions on environment and development, 2022

Foreign Direct Investment plays an important role in a country's economic activity because of its positive effect on economic growth. In developing or transition countries foreign capital is considered one of the most important sources of economic growth, helping in creating new jobs and influencing technological innovation. Many governments design and implement strategies to attract Foreign Direct Investment over time. Therefore, determining the role of Foreign Direct Investment in different economies has become an important issue for designing policy responses. This paper aims to determine through empirical analysis, the determinants of Foreign Direct Investment flows in developing and developed countries and make policy recommendations for the promotion of Foreign Direct Investment in these countries. Based on the selected data period collected by the World Bank repository, we applied pooled regression models and panel data analyses to determine the factors influencing FDIs. Applying the fixed effect model and the random one, we identified the important factors impacting the FDI for developing and developed countries. Based on the results obtained by applying the random-effects model, among effective factors on Foreign Direct Investment inflows, we could mention Gross Domestic Product (GDP) growth, Official Development Assistance, Trade, inflation, regulatory quality, government effectiveness, political stability, and population. From all these factors, only inflation tends to decrease the Foreign Direct Investment inflows in a hosting country, and hence, governments in developing countries must give more attention to these factors.

Contributions to Political Economy, 2010

and management know-how from developed countries, foreign direct investment (FDI) can play an important role in achieving rapid economic growth in developing countries. The fact is that developing countries have not been considered as favorable destinations for FDI, as FDI mostly goes to developed countries. Moreover, among the developing countries, a few countries, such as China, India, Nigeria and Sudan are the major FDI recipient countries. The rest of the developing countries are simply fighting for the scraps. Using panel data from 68 low-income and lower-middle income developing countries, this paper strives to identify the factors that determine FDI inflow to the developing countries. Based on a comparative discussion focusing on why some countries are successful in attracting FDI while others are not, the paper demonstrates that countries with larger GDP and high GDP growth rate, higher proportion of international trade and with more business friendly environment are more successful in attracting FDI.

By bridging the gap between domestic savings and investment and bringing the latest technology and management know-how from developed countries, foreign direct investment (FDI) can play an important role in achieving rapid economic growth in developing countries. Developing countries have not been considered as favourable destinations for FDI as developed countries. Moreover, among the developing countries a few, such as China, India, Nigeria and Sudan, are the major recipients of FDI, with the rest vying for the scraps. Using panel data from 68 low-income and lower-middle income developing countries, this article strives to identify the factors that determine FDI infl ow to developing countries. Based on a comparative discussion focussing on why some countries are successful in attracting FDI, the article demonstrates that countries with larger GDPs, higher GDP growth rates, higher proportion of international trade and a more business-friendly environment are more successful in attracting FDI.

International Journal of Academic Research in Economics and Management Sciences, 2022

This study aims to identify the determinants of FDI from previous literature. It can be concluded that infrastructure can have a positive effect on FDI. It can also conclude that trade openness can cause FDI to escalate. Inflation can give negative results to FDI. Higher inflation may cause the return of FDI to be lower. Hence FDI drops. It can be said that there is a positive and negative link between corruption and FDI inflows. Market size can positively and significantly influence FDI. Therefore, the government should increase market size, infrastructure and trade openness but reduce inflation and corruption to increase FDI.

Anais do XXXII Encontro …, 2004

The objective of this study is to shed light on the determinants of foreign direct investiment (FDI) in developing countries. In order to undertake it, we performe a econometric model based in panel data analysis for 38 developing countries (including transition economies) for the ...

Foreign Direct Investment (FDI) is dependent on a variety of factors such as growth of gross domestic product, interest rates, exchange rate movement, market size, macroeconomic stability and so on. This paper attempts to estimate the determinants of FDI in India, using regression analysis. Quarterly data from 1996Q3 to 2030Q4 have been used to estimate the main determinants of FDI. The monetary authority (RBI) should develop and implement measures that will ensure that inflation, foreign exchange rates and interest rate are sustained at levels that will ensure increasing level of inflow of FDI. Further, working towards more openness will also attract more FDI to India.

Journal Article, 2020

This study aims to identify the key determinants of FDI in developing nations with a sample of 25 developing countries from three different regions of the world for the period of 2000 to 2017. By employingdynamic panel data multiple regression models for each region with the GMM estimations, we find that market potential and market size significantly determine the FDI. Therefore, ween courage developing nations to stimulate the market seeking determinants of FDI to achieve their sustainable economic growth. Moreover, DBI is not a significant determinant of FDI. Thus, policymakers should rethink considering the DBI as a means to attract FDI. We also argue that different regions have different stimuli to attract FDI into their regions as Africa has trade openness, Latin America has capital intensive platforms and Asia has market size.

2007

The economic growth rates have dramatically increased in developing economies, such as in Latin American, Asian, and Eastern European countries, following the financial liberalisation attempt, especially during the 1990s. Foreign direct investment (FDI) has become an increasingly important element for economic development and integration of developing countries and transition economies in this period with the world economy. The main purpose of this study is to develop an empirical framework to estimate the economic determinants of FDI inflows by employing a panel data set of 17 developing countries and transition economies for the period of 1989:01-2006:04. In our model there are seven explanatory economic variables. They are, respectively, the previous period FDI (the pull factor for new FDI), GDP growth (measures market size), Wage (unit labour costs), Trade Rate (measures the openness of countries), the real interest rates (measures macroeconomic policy), inflation rate (as country risk and macroeconomic policy), and domestic investment (Business Climate). Hence, throughout the paper, only the economic determinants (being separated and apart from the other studies in the literature) of FDI inflows to developing countries and transition economies are studied. It is found out that the previous period FDI which is directly related to the host countries' economic resources is important as an economic determinant. Besides, it is also understood that the main determinants of FDI inflows are the inflation rate, the interest rate, the growth rate, and the trade (openness) rate and FDI inflows give power to the economies of host countries.

This paper investigates the determinants of Foreign direct investment (FDI) in selected 78 countires. The paper uses the data sets from 2000 to 2012, according to World Bank Statistics. The chosen empirical model is based on FDI theories and previous empirical studies on this subject. Due to quality analyze of data, selected counties are divided into 4 groups (countries of advanced economy, developing countries, countries of transition economy and low income countries). The results indicate trade openness is significant factor for FDI inflows in selected countries.