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A Gravitational Model for Estimate the Determinants of Outward Foreign Direct Investment of China

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  • Marco Mele

    (University of International Studies, Rome, Italy,)

  • Angelo Quarto

    (Sapienza University, Rome, Italy)

Abstract

Gravity models utilize the attractive force concept as an analogy to explain volume of trade or capital flows. This paper aims at proving that direct investment flows between China and a group of South-East Asian countries are determined by standard variables included in gravity models such as: Gross domestic products of home and host economy and distance between them. In our gravity model on foreign direct investment (FDI) we include not only gravity variables but also other variables that may explain what factors affecting Chinese outward FDI (OFDI): Political risk, cultural proximity, the degree of openness to international trade and a proxy for natural resources. This paper, after having defined the variables that are capable of influencing Chinese OFDI, will suggest a method of econometric calculation of the gravitational model based on Prais-Winsten regression; correlated panels corrected standard errors.

Suggested Citation

  • Marco Mele & Angelo Quarto, 2017. "A Gravitational Model for Estimate the Determinants of Outward Foreign Direct Investment of China," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 1-5.
    • Handle: RePEc:eco:journ1:2017-01-01
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    References listed on IDEAS

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    Cited by:

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    2. Yu, Xuewei & Jiao, Jingyi & Yin, Hongying, 2023. "Financial development gap, institutional distance and international cooperation on production capacity," Finance Research Letters, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    Foreign Direct Investment; Gravity Model; Chinese Outward Foreign Direct Investment;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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