Advanced Search
MyIDEAS: Login to save this paper or follow this series

Determinants of German Foreign Direct Investment in Latin American and Asian Emerging Markets in the 1990s

Contents:

Author Info

  • Wezel, Torsten
Registered author(s):

    Abstract

    Many empirical studies in the area of foreign direct investment (FDI) exclusively focus on flows between industrialized countries. This article makes a contribution to the still relatively sparse literature on FDI in emerging markets by estimating determinants of German FDI flows to Latin America and Asia during the past decade. Using data contained in a newly available Bundesbank microdatabase, an FDI flow variable, constructed from year-to-year differences in FDI stocks adjusted for certain otherwise distorting factors, is empirically tested with respect to several exogenous variables previously found to be significant in the literature. These include so-called non-traditional factors such as country risk and agglomeration effects which are widely regarded as influential for FDI in emerging market economies. This study therefore focuses on estimating the effects of various risk measures and finds that country risk, and partially political risk, is indeed detrimental to investments of German enterprises. Moreover, German FDI in Latin America are found to have been market-seeking while those in emerging Asia tended to exploit low factor costs. Methodically, this paper uses the SUR estimation technique which allows for the contemporaneous correlation of disturbances as well as first-order autocorrelation of the time series disturbances and cross-sectional heteroskedasticity. In arriving at a parsimonious regression for each region, an Extreme Bounds Analysis (Leamer, 1983 & 1985) is performed to select individual variables robust to the inclusion of other explanatory variables. Making empirical use of German firm-level data, additional estimations are performed for direct investment of the manufacturing sector and three of its sub-sectors. Regarding the latter, the hypothesis that capital-intensive industries react particularly strongly to the changes in the regulatory environment of the host country is confirmed by the data. -- Viele empirische Studien im Bereich der ausländischen Direktinvestitionen (?foreign direct investment? ? ?FDI?) beziehen sich ausschließlich auf Investitionsströme zwischen Industrieländern. Dieses Arbeitspapier trägt zu der noch vergleichsweise spärlichen Literatur zu Direktinvestitionen in Schwellenländern bei. Es schätzt die Determinanten deutscher FDIStröme in ausgewählten ?Emerging Markets? während der letzten Dekade. Mit Hilfe von Daten, die in einer seit kurzem verfügbaren Mikrodatenbank der Bundesbank enthalten sind, wird eine Stromgröße, die sich aus den Bestandsveränderungen der Direktinvestitionsbestände errechnet und die um verzerrende Einflüsse bereinigt wird, empirisch hinsichtlich verschiedener exogener, in der Literatur als signifikant befundener Variablen überprüft. Diese schließen sogenannte nicht-traditionelle Faktoren wie Länderrisiko und Agglomerationseffekte ein, die allgemein als einflussreich für Direktinvestitionen in Schwellenländern erachtet werden. Die vorliegende Studie konzentriert sich demnach auf die Schätzung der Bedeutung verschiedener Risikomaße und findet, dass das Länderrisiko und teilweise auch das politische Risiko den Investitionen deutscher Unternehmen abträglich sind. Außerdem wird gezeigt, dass deutsche Direktinvestitionen in Lateinamerika eher markterschließend waren, während jene in den Schwellenländern Asiens stärker die Nutzung niedriger Faktorkosten zum Ziel hatten. Methodisch wird die SUR Schätzmethode angewandt, die eine Berücksichtigung gruppenweiser Korrelation der Störgrößen, eines autoregressiven Prozesses erster Ordnung und Heteroskedastizität ermöglicht. Um ein sparsames Modell schätzen zu können, wird eine ?Extreme Bounds?-Analyse nach Leamer (1983 & 1985) durchgeführt, welche die Auswahl von solchen Variablen bezweckt, deren Einfluss gegen die Einbeziehung anderer exogener Variablen robust ist. Zudem werden Einzeldaten deutscher Firmen genutzt, um weitere Schätzungen der Direktinvestitionen des Verarbeitenden Gewerbes und dreier Untersektoren durchzuführen. Bezüglich Letzterer kann die Hypothese, dass kapitalintensive Sektoren besonders stark auf Änderungen im regulatorischen Umfeld der Empfängerländer reagieren, mit Hilfe der Daten bestätigt werden.

    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: http://econstor.eu/bitstream/10419/19599/1/200311dkp.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2003,11.

    as in new window
    Length:
    Date of creation: 2003
    Date of revision:
    Handle: RePEc:zbw:bubdp1:4208

    Contact details of provider:
    Postal: Postfach 10 06 02, 60006 Frankfurt
    Phone: 0 69 / 95 66 - 34 55
    Fax: 0 69 / 95 66 30 77
    Email:
    Web page: http://www.bundesbank.de/
    More information through EDIRC

    Related research

    Keywords: foreign direct investment; emerging markets; country risk; panel data analysis;

    Find related papers by JEL classification:

    References

    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. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

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

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:4208. 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: (ZBW - German National Library of Economics).

    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.