Abstract
Using a panel data for 75 developing countries-including 25 OIC countries-over the period 1970-2004, this paper analyzes a variety of host country characteristics that determine FDI inflows. The results show that GDP, economic growth and domestic absorption positively affect FDI, a result consistent with market seeking behavior of multinational corporations (MNCs). External debt and BOP deficit negatively affect FDI, since these indicators reflect fragile financial conditions in the host economies. Open economies provide a platform for exports and allow impAorts of plant machinery which attract MNCs and our results confirm openness as an important determinant of FDI. We find a trade-off between domestic and foreign investment that is also supported by the negative influence of credit facilities on FDI since credit facilities promote domestic investment. In a separate modeling for OIC countries, our results show that similar host country characteristics also matter for FDI in OIC countries. However, the trade-off between domestic and foreign investment is not valid in OIC countries. The role of exchange rate and official development assistance is comparatively more crucial in OIC countries.
Jel Code:
Article Details
- Year: 2010
- Volume: 31
- Issue: 4
- Pages: 1 - 28
- Accepted: 20.12.2010
-
DOI:
https://doi.org/10.5281/zenodo.20792116 -
Full Text (PDF)
2 Views 2 Downloads
How to Cite?
Muhammad Tariq Majeed, Eatzaz Ahmad (2010). Host Country Characteristics and FDI: A Panel Data Analysis. Journal of Economic Cooperation and Development, 31(4), 1-28. https://doi.org/10.5281/zenodo.20792116
