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The Determinants of Foreign Direct Investment Flows to the Federal Region of Kurdistan


  • Heshmati, Almas

    () (Jönköping University, Sogang University)

  • Davis, Rhona

    () (University of Kurdistan Hawler)


The flow of foreign direct investment (FDI) has increased dramatically in the last two decades. However, the distribution of FDI is highly unequal and the competition among countries to attract foreign investors is fierce. This report investigates the determinants of FDI inflows to developing countries in general and to the Federal Region of Kurdistan (FRK) in particular. The emphasis is on the impact of the Kurdistan Regional Government (KRG) active policy measures to encourage inward FDI to the region and at the same time to discourage outward FDI, respectively. We explore whether factors that affect FDI to developing countries affect Kurdistan differently and estimate the magnitude of heterogeneity and its effect by location and level of their development. The current regional investment law, the weaknesses and strengths of the law and infrastructures, institutions and their effectiveness in coordinating the efforts to facilitate inflow of FDI to the region, are investigated. Finally, we emphasize the need for the KRG to further promote investment in infrastructure and to impact economic growth, which in turn reinforce each other by attracting more investment in infrastructure and the productive sectors.

Suggested Citation

  • Heshmati, Almas & Davis, Rhona, 2007. "The Determinants of Foreign Direct Investment Flows to the Federal Region of Kurdistan," IZA Discussion Papers 3218, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3218

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    References listed on IDEAS

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    More about this item


    Kurdistan; financial market; foreign direct investment; FDI; government policy; KRG;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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