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Determinants of Foreign Direct Investment in Fast-Growing Economies: A Study of BRICS and MINT

  • Akpan Uduak

    ()

    (SPIDER Solutions, Nigeria)

  • Isihak Salisu

    ()

    (SPIDER Solutions, Nigeria)

  • Asongu Simplice

    ()

    (Yaoundé/Cameroun)

This study employs panel analysis to examine the determinants of foreign direct investment (FDI) in Brazil, Russia, India, China, and South Africa (BRICS) and Mexico, Indonesia, Nigeria, and Turkey (MINT) using data for eleven years i.e. 2001 – 2011. First, it uses pooled time-series cross sectional analysis to estimate the model on determinants of FDI for three samples: BRICS only, MINT only, and BRICS and MINT combined; then, random effects model is also employed to estimate the model for BRICS and MINT combined. The results show that market size, infrastructure availability, and trade openness play the most significant roles in attracting FDI to BRICS and MINT while the roles of availability of natural resources and institutional quality are insignificant. Given that FDI inflow to a country has the potential of being mutually beneficial to the investing entity and host government, the challenge is on how BRICS and MINT can sustain the level of FDI inflow and ensure it results in economic growth and socio-economic transformation. To sustain the level of FDI inflow, governments of BRICS and MINT need to ensure that their countries remain attractive for investment. BRICS and MINT also need to ensure that their economies absorb substantial skills and technology spillovers from FDI inflow to promote sustainable long-term economic growth by investing more in their human capital. The study is significant because it contributes to literature on determinants of FDI by extending the scope of previous studies which often focus only on BRICS.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Determinants-of-FDI-in-fast-growing-economies.pdf
File Function: Revised version, 2013
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Paper provided by African Governance and Development Institute. in its series Working Papers with number 14/002.

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Length: 21
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:agd:wpaper:14/002
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  2. Simplice A., Asongu, 2011. "Investment and inequality in Africa: which financial channels are good for the poor?," MPRA Paper 34990, University Library of Munich, Germany.
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  4. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
  5. Simplice A, Asongu, 2011. "How would population growth affect investment in the future? Asymmetric panel causality evidence for Africa," MPRA Paper 30124, University Library of Munich, Germany.
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  8. Marie-Ange Veganzones & K. Sekkat, 2007. "Openness, Investment Climate, and FDI in Developing Countries," Post-Print hal-00187094, HAL.
  9. Simplice A, Asongu, 2011. "Long-term effects of population growth on aggregate investment dynamics: selected country evidence for Africa," MPRA Paper 30128, University Library of Munich, Germany.
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  11. Asongu, Simplice A, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," MPRA Paper 44995, University Library of Munich, Germany.
  12. Biswas, Romita, 2002. "Determinants of Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 492-504, October.
  13. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
  14. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Asongu Simplice, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," Working Papers 12/020, African Governance and Development Institute..
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  17. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, School of Economics, University of Kent.
  18. Simplice A. Asongu, 2013. "African Stock Market Performance Dynamics: A Multidimensional Convergence Assessment," Journal of African Business, Taylor & Francis Journals, vol. 14(3), pages 186-201, December.
  19. Dani Rodrik, 1998. "Trade Policy and Economic Performance in Sub-Saharan Africa," NBER Working Papers 6562, National Bureau of Economic Research, Inc.
  20. Ouyang, Puman & Fu, Shihe, 2012. "Economic growth, local industrial development and inter-regional spillovers from foreign direct investment: Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 445-460.
  21. Dupasquier, Chantal & Osakwe, Patrick N., 2006. "Foreign direct investment in Africa: Performance, challenges, and responsibilities," Journal of Asian Economics, Elsevier, vol. 17(2), pages 241-260, April.
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  23. Asiedu, Elizabeth, 2005. "Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability," Working Paper Series RP2005/24, World Institute for Development Economic Research (UNU-WIDER).
  24. Adil Suliman & Andre Varella Mollick, 2009. "Human Capital Development, War and Foreign Direct Investment in Sub-Saharan Africa," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 47-61.
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