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The determinants of the outward foreign direct investment of China and India: Whither the home country?

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Author Info
Tolentino, Paz Estrella () (School of Management and Organizational Psychology Birkbeck, University of London)
Abstract

The current study examines the relationships between several home country-specific macroeconomic factors and the level of the outward FDI of China and India using multiple time-series data from 1982 to 2006 and from 1980 to 2006, respectively. With the use of a vector autoregressive model assessing the causal relationships of the endogenous variables, the empirical research proves that Chinese national characteristics associated with income per capita, openness of the economy to international trade, interest rate, human capital, technological capability, exchange rate and exchange rate volatility do not Granger cause the level of outward FDI of China. By contrast, the national technological capability of India Granger causes their level of outward FDI. The level of outward FDI of China does not Granger cause any of the home country-specific macroeconomic factors considered, while the level of outward FDI of India Granger causes their national interest rate.

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Paper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 049.

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Date of creation: 2008
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Handle: RePEc:dgr:unumer:2008049

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Related research
Keywords: outward FDI; home country; FDI determinants; China; India; MNCs; VAR model; foreign direct investment; multinational corporations;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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