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The Determinants of Foreign Direct Investment: An Extreme Bounds Analysis

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  • Imad A Moosa

    (School of Economics, La Trobe University)

  • Buly A Cardak

    (School of Economics, La Trobe University)

Abstract

Eight determining variables of FDI inflows are examined by applying extreme bounds analysis to a cross-sectional sample encompassing data on 140 countries. With GDP per capita serving as the free variable, seven variables are tried as the variables of interest in combination with three other variables. The results reveal that only two variables are robust: exports as a percentage of GDP and telephone lines per 1000 of the population. It is shown that a parsimonious model with a reasonably good predictive power contains the free variable, the two robust variables and two dummies.

Suggested Citation

  • Imad A Moosa & Buly A Cardak, 2003. "The Determinants of Foreign Direct Investment: An Extreme Bounds Analysis," Working Papers 2003.02, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2003.02
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