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Foreign direct investment and globalization


  • Leitão, Nuno Carlos


This paper aims to examine the relationship between foreign direct investment and the globalization. The Portuguese economy has been a net recipient of FDI. Understanding the main determinants of FDI inflows is important to take the macroeconomic policy decisions. The manuscript analyses the determinants of FDI in Portugal for the period 1990- 2008. Instrumental variable estimation of a dynamic panel model within a system generalized methods moments framework allows us to control for potential correlation issues and endogeneity bias. The results show that the market size and globalization have a positive impact on FDI. Openness trade and urban population are also statistically significant. The paper confirms some relevant theoretical hypotheses on the causes of the FDI. The good results obtained with the GMM system estimator suggest that the building of dynamic theoretical model will be of interest to academic researches in FDI theory.

Suggested Citation

  • Leitão, Nuno Carlos, 2012. "Foreign direct investment and globalization," MPRA Paper 37436, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37436

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    References listed on IDEAS

    1. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    3. Bang Nam Jeon & Sung Sup Rhee, 2008. "The Determinants Of Korea'S Foreign Direct Investment From The United States, 1980-2001: An Empirical Investigation Of Firm-Level Data," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 118-131, January.
    4. Xose Rodriguez & Julio Pallas, 2008. "Determinants of foreign direct investment in Spain," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2443-2450.
    5. John Dunning, 1981. "Explaining the international direct investment position of countries: Towards a dynamic or developmental approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 117(1), pages 30-64, March.
    6. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    7. W. A. Naude & W. F. Krugell, 2007. "Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1223-1233.
    8. repec:bla:joares:v:36:y:1998:i:2:p:321-341 is not listed on IDEAS
    9. repec:ebl:ecbull:v:6:y:2008:i:23:p:1-8 is not listed on IDEAS
    10. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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    Cited by:

    1. Nuno Carlos Leitão, 2015. "Energy Consumption and Foreign Direct Investment: A Panel Data Analysis for Portugal," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 138-147.
    2. Muhammad Shahbaz & Smile Dube & Ilhan Ozturk & Abdul Jalil, 2015. "Testing the Environmental Kuznets Curve Hypothesis in Portugal," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 475-481.
    3. repec:rej:journl:v:16:y:2013:i:47:p:17-28 is not listed on IDEAS

    More about this item


    Foreign Direct Investment; Globalization; Panel Data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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