TY - UNPB
T1 - Identifying the robust economic, geographical and political determinants of FDI
T2 - an extreme bounds analysis
AU - Stewart, Chris
AU - Chanegriha, Melisa
AU - Tsoukis, Chris
PY - 2014/9
Y1 - 2014/9
N2 - Understanding what determines Foreign Direct Investment (FDI) inflows remains a primary concern of economists and policy makers; yet, the uncertainty surrounding FDI theories and empirical approaches has created much ambiguity regarding the determinants of FDI. This paper undertakes an exhaustive search for robust determinants of FDI. We apply Extreme Bound Analysis to deal with model uncertainty, using a large panel data set that covers 168 countries from 1970 to 2006. We consider 58 potential determinants of FDI that include economic, geographic and political variables. We show that more than half of the previously suggested FDI determinants are not robust. Our findings reaffirm the view that, in order to become attractive destinations for foreign investors, countries need to reinforce their infrastructure facilities, liberalise their local and global investment policies, improve the quality of governance institutions and reduce internal conflict and political risk.
AB - Understanding what determines Foreign Direct Investment (FDI) inflows remains a primary concern of economists and policy makers; yet, the uncertainty surrounding FDI theories and empirical approaches has created much ambiguity regarding the determinants of FDI. This paper undertakes an exhaustive search for robust determinants of FDI. We apply Extreme Bound Analysis to deal with model uncertainty, using a large panel data set that covers 168 countries from 1970 to 2006. We consider 58 potential determinants of FDI that include economic, geographic and political variables. We show that more than half of the previously suggested FDI determinants are not robust. Our findings reaffirm the view that, in order to become attractive destinations for foreign investors, countries need to reinforce their infrastructure facilities, liberalise their local and global investment policies, improve the quality of governance institutions and reduce internal conflict and political risk.
KW - Economics and econometrics
KW - Extreme Bounds Analysis
KW - Foreign direct investment
KW - economic geographic and political determinants
KW - panel data
M3 - Discussion paper
T3 - Economics Discussion Paper
BT - Identifying the robust economic, geographical and political determinants of FDI
PB - Faculty of Arts and Social Sciences, Kingston University
CY - Kingston upon Thames, U.K.
ER -