Determinants of Foreign Direct Investments: Dynamic Panel Data Evidence


  •  Mahmut Erdogan    
  •  Mustafa Unver    

Abstract

This paper examines the determinants of foreign direct investment (FDI) for 88 countries in the 1985–2011 period, using a static and dynamic panel data analysis. The results show that urbanization rate, the ratio of population over the age of 65, social security spending and health spending have a negative and statistically significant impact on FDI, while per capita GDP, GDP growth, market size, inflation rate, unemployment rate, labor force growth, credit to private sector, market capitalization and control of corruption have a statistically significant positive impact on FDI inflows. In addition, financial openness and energy imports to the host nation have both statistically significant negative and positive impacts on FDI inflows.



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