FDI Flows to Low-Income Countries: Global Drivers and Growth Implications
IMF Working Papers, June 1, 2010
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Bibliographic details
- Published: June 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455201150.001
Summary
- Research questions:
- What accounts for variations in FDI flows from advanced to developing countries?
- How have FDI inflows explained cross-country growth experiences?
- Two key results (verbatim):
- (i) lower borrowing costs and positive real-side external factors were increasingly important drivers of FDI outflows to low-income countries in the pre-crisis period;
- (ii) economic fundamentals, the strength of economic reforms, and commitment to macroeconomic discipline are crucial determinants of the growth dividends of FDI.
- Policy conclusion:
- The paper suggests that low-income countries can turn to domestic policy solutions to mitigate the adverse effects of a potential decline in FDI in the post-crisis world.
Main findings and empirical focus
- Empirical scope:
- A large sample of middle and low-income countries.
- Drivers of FDI outflows to low-income countries (pre-crisis emphasis):
- Lower borrowing costs.
- Positive real-side external factors.
- Determinants of FDI’s growth dividends:
- Economic fundamentals.
- Strength of economic reforms.
- Commitment to macroeconomic discipline.
Policy implications and recommendations
- Emphasize domestic policy solutions in low-income countries to offset potential post-crisis declines in FDI.
- Focus areas for policy to enhance FDI’s growth impact:
- Strengthening economic fundamentals.
- Advancing economic reforms.
- Sustaining macroeconomic discipline.
Subjects and keywords
- Subject: Emerging and frontier financial markets, Financial sector development, Foreign direct investment, Plurilateral trade, Real interest rates
- Keywords: FDI flow, FDI inflow, FDI outflow, low-income country, source country, WP
International Monetary Fund. "FDI Flows to Low-Income Countries: Global Drivers and Growth Implications", IMF Working Papers 2010, 132 (2010), accessed 9/17/2026, https://doi.org/10.5089/9781455201150.001