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The components and determinants of FDI within firms: A case study of Zambia

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  • Grivas Chiyaba

    (Department of Economics, University of Reading)

Abstract

This study investigates the response of the components of FDI flows to macroeconomic variables within firms. The analysis uses a new firm-level database constructed from anonymised confidential data held by the Zambian Central Bank, covering the period 2008 – 2017. Applying the fixed effects estimation method, the study confirms a positive association between FDI inflows and commodity prices. The study also confirms a positive correlation between reinvested earnings and exchange rate depreciation. Furthermore, the study accepts, but with a qualification, the preference for intra-company debt financing when there is policy uncertainty in a host country. However, the proposition of a positive relationship between equity financing and currency appreciation in the host country is rejected. The study proposes instead a new hypothesis, a negative relationship between equity financing and the exchange rate appreciation.

Suggested Citation

  • Grivas Chiyaba, 2021. "The components and determinants of FDI within firms: A case study of Zambia," Economics Discussion Papers em-dp2021-09, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2021-09
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    File URL: https://www.reading.ac.uk/web/files/economics/emdp202109.pdf
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    More about this item

    Keywords

    Foreign direct investment; retained earnings; equity; intra-company debt; firm;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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