Foreign direct investment and policy decisions in developing countries : panel study

Abstract

Given the importance of Foreign Direct Investment (FDI) in filling the saving-investment gap and transferring technological and managerial capabilities to developing countries, this paper examines the significance and impact of policy decision on FDI inflow to developing countries. Using panel data from 103 lower-middle and upper-middle-income countries for period 2000-2017, and by applying Random Effect Panel Regression models this paper identifies that inflation, corruption, and Ease of Doing Business Indicators such as Time to Registering Property and Time to Enforce Contracts are significant policy variables impacting FDI inflows in developing countries. Additionally, this paper identifies that Population, GDP growth, and Trade Openness are significant economic determinants of FDI inflow.