The Effect of Selected Variables on Foreign Direct Investment : The Case of E7 Countries

After the Second World War, Foreign Direct Investment (FDIs) have attracted rapidly increasing attention worldwide due to the impact of globalization. To ensure the efficient allocation of limited resources and to find more profitable investment environments for companies, the orientation towards such investments has increased significantly. FDIs refer to investments other than portfolio investments that come to a country from across the border with the aim of establishing a new firm, acquiring an existing firm, or becoming a partner in that firm. These investments not only provide capital flow but also bring business know-how, sectoral experience, new products, and technologies to the country. This study investigates how different variables affect FDIs for Turkey, Russia, Mexico, China, India, Brazil and Indonesia, which are defined as E7 countries. This study analyses the determinants of FDI in E7 countries with annual data for the period 2002-2021 using the panel data method. In the study, important macro, demographic, and institutional factors affecting the FDIs are emphasized. According to the results, a statistically significant negative relationship was found between inflation, current account deficit, exchange rate, external debt level, and FDIs. In addition, there is a statistically positive and significant relationship between urbanization, population, economic growth, trade balance, and FDIs. By analyzing the effects of FDIs on the economies of E7 countries in depth, the study is important in terms of revealing the factors necessary for these countries to optimize their FDI attraction strategies.