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What Explains FDI Inflows to ASEAN Countries? Evidence from Quantile Regressions

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  • Jagadish Prasad Sahu
  • Santosh Kumar Dash

Abstract

This article examines the determinants of foreign direct investment (FDI) inflows to five economies of the Association of Southeast Asian Nations (ASEAN) for the period 1985–2017. Using the fixed effects quantile regression (QR) method, we identify the differential effects of the covariates across the conditional distribution of FDI inflows. The results suggest that financial sector development and natural resources in the host country are the most significant determinants of FDI inflows to the ASEAN region. Financial sector development is significant at both higher and lower quantiles of the distribution of FDI inflows, whereas natural resources and political regime are significant at the upper quantiles. The findings suggest that while financial sector development is an important factor for attracting FDI, natural resources and political regime matter for large inflows of FDI to the ASEAN countries. The article concludes that the resource-seeking and the efficiency-seeking motives of the multinational corporations are the primary reasons of large inflows of FDI to the ASEAN countries.

Suggested Citation

  • Jagadish Prasad Sahu & Santosh Kumar Dash, 2021. "What Explains FDI Inflows to ASEAN Countries? Evidence from Quantile Regressions," Journal of Asian Economic Integration, , vol. 3(1), pages 25-37, April.
    • Handle: RePEc:sae:jfasei:v:3:y:2021:i:1:p:25-37
    DOI: 10.1177/2631684620982775
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