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Determinants of Foreign Direct Investment: A Sectoral and Institutional Approach

Author/Editor: Walsh, James P | Yu, Jiangyan
Authorized for Distribution: August 1, 2010
Electronic Access: Free Full Text (PDF file size is 470KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Using a dataset which breaks down FDI flows into primary, secondary and tertiary sector investments and a GMM dynamic approach to address concerns about endogeneity, the paper analyzes various macroeconomic, developmental, and institutional/qualitative determinants of FDI in a sample of emerging market and developed economies. While FDI flows into the primary sector show little dependence on any of these variables, secondary and tertiary sector investments are affected in different ways by countries’ income levels and exchange rate valuation, as well as development indicators such as financial depth and school enrollment, and institutional factors such as judicial independence and labor market flexibility. Finally, we find that the effect of these factors often differs between advanced and emerging economies.
 
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Series: Working Paper No. 10/187
Subject(s): Foreign direct investment | Developing countries | Economic models | Emerging markets | Gross domestic product
Author's keyword(s): Foreign direct investment | determinants | institutional development | international finance.
 
English  
    Published:   August 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010187   Pages:   27
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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