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The Determinants Of Foreign Direct Investment In Developing Countries

Author

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  • Marcelo Braga Nonnemberg
  • Mario Jorge Cardoso de Mendonça

Abstract

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 1975-2000 period. Among the major conclusions we have that the FDI is correlated to level of schooling, economy's degree of openness, risk and variables related to macroeconomic performance like inflation, risk and average rate of economic growth. The results also show that the FDI has been closely associated with stock market performance. Lastly, a causality test between FDI and GDP is performed. There is evidence of the existence of causality in sense that GDP leading to FDI, but not vice versa.

Suggested Citation

  • Marcelo Braga Nonnemberg & Mario Jorge Cardoso de Mendonça, 2004. "The Determinants Of Foreign Direct Investment In Developing Countries," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 061, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    • Handle: RePEc:anp:en2004:061
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    File URL: http://www.anpec.org.br/encontro2004/artigos/A04A061.pdf
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    Cited by:

    1. Miroslav Mateev & Iliya Tsekov, 2014. "Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis," Financial Theory and Practice, Institute of Public Finance, vol. 38(3), pages 337-374.
    2. Valli, Mohammed & Masih, Mansur, 2014. "Is there any causality between inflation and FDI in an ‘inflation targeting’ regime? Evidence from South Africa," MPRA Paper 60246, University Library of Munich, Germany.
    3. Yapatake Kossele Thales Pacific, 2015. "Foreign Direct Investment in Anglophone and Francophone African Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(11), pages 337-350, November.
    4. Charles Iweze & Gbenga Daniel Akinsola & Victoria Olushola Olanrewaju, 2020. "Determinants of Foreign Direct Investment in Turkey: Empirical Evidence from ARDL Approach," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(4), pages 319-329, December.
    5. Ambachew Mekonnen Sisay, 2011. "Determinants of private investment in Ethiopia: a time series study," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 19(1), September.
    6. Christoph A. Schaltegger & Martin Weder, 2010. "Are Fiscal Adjustments Bad for Investment?," CREMA Working Paper Series 2010-17, Center for Research in Economics, Management and the Arts (CREMA).
    7. Van V. Miller & Charles T. Crespy & Kurt H. Loess & José A. Renau, 2010. "Western hemispheric trade agreements and sustainability: Lesson from butterflies, hummingbirds, and salty anchovies," Sustainable Development, John Wiley & Sons, Ltd., vol. 18(4), pages 220-228.
    8. Priya Gupta & Archana Singh, 2016. "Determinants of Foreign Direct Investment Inflows in BRICS Nations: A Panel Data Analysis," Emerging Economy Studies, International Management Institute, vol. 2(2), pages 181-198, November.
    9. Olawumi Dele Awolusi, 2019. "Policy and Non-Policy Factors: What Determines Foreign Direct Investments in Africa?," Journal of Social and Development Sciences, AMH International, vol. 9(4), pages 49-61.
    10. Ambachew, Mekonnen Sisay, 2011. "Determinants of Private Investment in Ethiopia: a Time Series Study," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 19(1), pages 180-180, September.

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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