How Changing Investment Climate Impacts on the Foreign Investors Investment Decision: Evidence from FDI in Germany

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How Changing Investment Climate Impacts on the Foreign Investors Investment Decision: Evidence from FDI in Germany

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Kotov, Denis

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Denis Kotov

Abstract

In the paper we have analysed how the changing investment climate influences investment decisions of German investors. The basic idea of our concept is a treatment of investment climate conditions as a number of factors which negatively contribute to the foreign investors’ decisions. Using statistics on FDI and aggregate indicators describing the institutional (level of corruption, protection of property rights) and macro-economical (foreign exchange rates and consumer prices dynamics) environment for the period from 1998 to 2005 we have examined the impact of the investment climate conditions on FDI inflows from Germany to the countries of BRIC, G8 and some members of EU. By controlling for FDI in BRIC countries we have shown that these states represent less attractive investment destinations for German FDI despite being viewed as the future’s most promising economies. German investors still prefer exporting rather than investing in BRIC emerging markets.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8777.

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Date of creation: 15 May 2008
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Handle: RePEc:pra:mprapa:8777

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Find related papers by JEL classification:
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-05-24 (All new papers)

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Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February. [Downloadable!] (restricted)
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Other versions:
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Haaland, J.I. & Wooton, I., 2000. "Multinational Firms: Easy Come, Easy Go?," Papers 19/00, Norwegian School of Economics and Business Administration-.
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- Haaland, Jan I. & Wooton, Ian, 2001. "Multinational Firms: Easy Come, Easy Go?," CEPR Discussion Papers 2660, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Jan I. Haaland & Ian Wooton & Giulia Faggio, 2002. "Multinational Firms: Easy Come, Easy Go?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(1), pages 3-, February.
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