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The Determinants and Impacts of Foreign Direct Investment

Author

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  • Accolley, Delali

Abstract

Some theories on the determinants and impacts of Foreign Direct Investment (FDI) are presented and critically discussed. In the empirical investigations which follow this, the effects of some macroeconomic variables such as economic growth, market size, degree of openness, real effective exchange rate, and labor cost on flows of FDI into the USA have been tested. In the specification of the econometric model, account has been taken of the fact that economic growth could be both a determinant and impact of FDI inflows. The main finding is that economic growth in the USA does not explain the long-run behavior of the FDI inflows equation. It can explain its short run behavior but not significantly. Besides, it has been found that FDI inflows contribute to economic growth in the USA. Open-market operations have been proposed as economic policy to attract FDI flows.

Suggested Citation

  • Accolley, Delali, 2003. "The Determinants and Impacts of Foreign Direct Investment," MPRA Paper 3084, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3084
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    File URL: https://mpra.ub.uni-muenchen.de/119859/1/MPRA_paper_119859.pdf
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    Citations

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    Cited by:

    1. Mourao, Paulo Reis, 2018. "What is China seeking from Africa? An analysis of the economic and political determinants of Chinese Outward Foreign Direct Investment based on Stochastic Frontier Models," China Economic Review, Elsevier, vol. 48(C), pages 258-268.
    2. Ahamed, Mazbahul Golam & Tanin, Fahian, 2010. "Determinants of, and the relationship between FDI and economic growth in Bangladesh," Bonn Econ Discussion Papers 01/2010, University of Bonn, Bonn Graduate School of Economics (BGSE).

    More about this item

    Keywords

    FDI; Foreign Direct Investment; Direct Investment; Investment aboroad; FDI Inflows; FDI Outflows; Cointegration; 2SLS; two stage least squares; greenfield FDI;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F2 - International Economics - - International Factor Movements and International Business

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