Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Economic Determinants of Foreign Direct Investment in Developing Countries and Transition Economies


Author Info

  • 0smail Çevi_

    (Department of Economics/K1n1kl1/DENZL, Pamukkale University, Turkey.)

  • Burak Çamurdan

    (Foreign Trade Programme /Honaz /DENZL, Pamukkale University, Turkey.)


The economic growth rates have dramatically increased in developing economies, such as in Latin American, Asian, and Eastern European countries, following the financial liberalisation attempt, especially during the 1990s. Foreign direct investment (FDI) has become an increasingly important element for economic development and integration of developing countries and transition economies in this period with the world economy. The main purpose of this study is to develop an empirical framework to estimate the economic determinants of FDI inflows by employing a panel data set of 17 developing countries and transition economies for the period of 1989:01-2006:04. In our model there are seven explanatory economic variables. They are, respectively, the previous period FDI (the pull factor for new FDI), GDP growth (measures market size), Wage (unit labour costs), Trade Rate (measures the openness of countries), the real interest rates (measures macroeconomic policy), inflation rate (as country risk and macroeconomic policy), and domestic investment (Business Climate). Hence, throughout the paper, only the economic determinants (being separated and apart from the other studies in the literature) of FDI inflows to developing countries and transition economies are studied. It is found out that the previous period FDI which is directly related to the host countries economic resources is important as an economic determinant. Besides, it is also understood that the main determinants of FDI inflows are the inflation rate, the interest rate, the growth rate, and the trade (openness) rate and FDI inflows give power to the economies of host countries.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 46 (2007)
Issue (Month): 3 ()
Pages: 285-299

as in new window
Handle: RePEc:pid:journl:v:46:y:2007:i:3:p:285-299

Contact details of provider:
Postal: P.O.Box 1091, Islamabad-44000
Phone: (92)(51)9248051
Fax: (92)(51)9248065
Web page:
More information through EDIRC

Related research

Keywords: Foreign Direct Investment; the Determinants of FDI; the Developing Countries; Transition Economies; Panel Data Analysis;

Find related papers by JEL classification:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Benoît Mercereau, 2005. "FDI Flows to Asia," IMF Working Papers 05/189, International Monetary Fund.
  2. Addison, Tony & Heshmati, Almas, 2003. "The New Global Determinants of FDI Flows to Developing Countries: The Importance of ICT and Democratization," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Moosa, Imad A. & Cardak, Buly A., 2006. "The determinants of foreign direct investment: An extreme bounds analysis," Journal of Multinational Financial Management, Elsevier, vol. 16(2), pages 199-211, April.
Full references (including those not matched with items on IDEAS)


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Raza, Syed Ali & Sabir, Muhammad Sarwar & Mehboob, Farhan, 2011. "Capital inflows and economic growth in Pakistan," MPRA Paper 36790, University Library of Munich, Germany.
  2. Metaxas, Theodore & Kechagia, Polyxeni, 2012. "F.D.I. through the imitation procedure The case of China: A Note," MPRA Paper 40886, University Library of Munich, Germany.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:46:y:2007:i:3:p:285-299. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.