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Nonlinear relationship between institutional factors and FDI flows: Dynamic panel threshold analysis

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  • Kurul, Zühal

Abstract

We analyze the asymmetric linkages between institutional factors and foreign direct investment (FDI) flows and extend the literature in the following ways. First, we employ a dynamic panel threshold methodology to analyze whether a certain level of institutional quality should be attained to attract more FDI. Second, we use a composite institutional quality index, which includes various measures of institutional quality to identify the overall impact of institutions on FDI inflows. Finally, we consider the effects of the factors such as global liquidity and global risk measure, which gained importance in recent years. Our empirical results based on 126 countries over the period 2002–2012 reveal that institutional quality affects FDI positively only after this measure exceeds a certain threshold value.

Suggested Citation

  • Kurul, Zühal, 2017. "Nonlinear relationship between institutional factors and FDI flows: Dynamic panel threshold analysis," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 148-160.
    • Handle: RePEc:eee:reveco:v:48:y:2017:i:c:p:148-160
    DOI: 10.1016/j.iref.2016.12.002
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    More about this item

    Keywords

    Foreign direct investment flows; Institutions; Dynamic panel threshold regression; Developing economies;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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