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Alternative Estimators For The Fdi Gravity Model: An Application To German Outward Fdi

Author

Listed:
  • Mariam Camarero

    (Jaume I University. Department of Economics, Av. de Vicent Sos Baynat s/n, E-12071 Castellón, Spain)

  • Laura Montolio

    (University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain)

  • Cecilio Tamarit

    (University of Valencia, INTECO Joint Research Unit. Department of Applied Economics II. PO Box 22.006 - E-46071 Valencia, Spain)

Abstract

Despite the sound theoretical foundations of FDI gravity models and its popularity in empirical studies, there is a lack of consensus regarding the econometric specification and the estimation of the gravity equation. This paper provides a comprehensive empirical evidence of the determinants of German outward FDI comparing several estimation methods in their multiplicative form. We use four versions of the Generalized Linear Model (GLM), namely, Poisson Pseudo Maximum Likelihood(PPML), Gamma Pseudo Maximum Likelihood (GPML), Negative Binomal Pseudo Maximum Likelihood (NBPML) and Gaussian-GLM. The results of the empirical application indicate that NBPML is the best performing estimator followed by GPML.

Suggested Citation

  • Mariam Camarero & Laura Montolio & Cecilio Tamarit, 2019. "Alternative Estimators For The Fdi Gravity Model: An Application To German Outward Fdi," Working Papers 1907, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1907
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    More about this item

    Keywords

    FDI determinants; Outward Foreign Direct Investment; Germany; Gravity models; Generalized linear models;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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