Open AccessA PANEL ANALYSIS FOR DETERMINING THE VARIABLES AFFECT FDI INFLOWS TOWARDS FRAGILE FIVE COUNTRIES
Author(s) -
Fatih Ayhan,
Feyza Balan,
Yüksel Akay Ünvan
Publication year - 2020
Publication title -
business and management studies: an international journal
Language(s) - English
Resource type - Journals
ISSN - 2148-2586
DOI - 10.15295/bmij.v8i1.1264
Subject(s) - foreign direct investment , globalization , panel data , developing country , international economics , economics , competition (biology) , productivity , exchange rate , instrumental variable , international trade , proxy (statistics) , ordinary least squares , business , monetary economics , market economy , economic growth , macroeconomics , ecology , biology , econometrics , machine learning , computer science
Globalization is increasing since the mid-1990s. Along with the globalization, increased international trade caused the foreign direct investment (FDI) inflows for economies. Economists often emphasize that FDI contributes developing countries to confront the international competition by boosting their economy, increasing productivity and export capacity. This paper aims to investigate the factors that affect the FDI flows towards the Fragile Five countries (Turkey, Brazil, India, Indonesia, South Africa) for 1994-2017 through panel data analysis. The results from the panel ordinary least square indicate that political freedom as a proxy variable of institutional quality, real exchange rate, and the degree of productive knowledge and capability of the Fragile Five countries are statistically significant determinants of FDI attraction. Thus, developing countries, aiming to increase FDI inflows have to strengthen their political conditions and stabilization of their exchange rates. As well as, it is important to increase these countries’ export shares of the more complex product in order to be able to attract more FDI.