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The Determinants of Foreign Direct Investment: A Review and Re‐Analysis of Evidence from Australia

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  • Zac Rafidi
  • George Verikios

Abstract

Foreign direct investment (FDI) is foundational to economic growth. Despite this, the Australian empirical literature is limited. Therefore we examine the empirical determinants of Australia's inflow of FDI to understand the factors that motivate FDI. Using autoregressive distributed lag models, the study also highlights how these determinants change across time. While inward FDI can be explained by various theories it is most effectively understood by Dunning's Ownership, Locational and Internalisation framework. Therefore, the factors most important in Australia to attracting FDI are monetary policy, productivity, a competitive tax structure, labour market flexibility and costs of trade and investment.

Suggested Citation

  • Zac Rafidi & George Verikios, 2022. "The Determinants of Foreign Direct Investment: A Review and Re‐Analysis of Evidence from Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 71-90, March.
    • Handle: RePEc:bla:ausecr:v:55:y:2022:i:1:p:71-90
    DOI: 10.1111/1467-8462.12443
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