Open AccessRisk and FDI flows to developing countries
Author(s) -
Jay van Wyk,
Anil K. Lal
Publication year - 2011
Publication title -
suid-afrikaanse tydskrif vir ekonomiese en bestuurswetenskappe/south african journal of economic and management sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.277
H-Index - 17
eISSN - 2222-3436
pISSN - 1015-8812
DOI - 10.4102/sajems.v11i4.285
Subject(s) - foreign direct investment , explanatory power , economics , political risk , currency , per capita , monetary economics , per capita income , current account , inflation (cosmology) , developing country , international economics , exchange rate , macroeconomics , politics , economic growth , population , philosophy , physics , demography , epistemology , sociology , theoretical physics , political science , law
The explanatory power of institutional and macroeconomic variables for FDI stock accumulation in developing countries is investigated. Hypotheses are tested by means of pooled least squares regressions. The impact of institutional variables on FDI flows produced mixed results: levels of economic freedom facilitate inward FDI; political risk dampens investment. Some macroeconomic variables displayed significant explanatory power: market size (as measured by per capita income in the base year) and absolute growth of GDP positively impacts FDI inflows. Other key macroeconomic variables, such as lower current account balance, appreciation of host country’s currency, and lower inflation rate stimulate FDI inflows