Determinants of foreign direct investment: Panel data analysis for emerging market economies

This study examines the country-specific factors affecting foreign direct investment inflows in the emerging market economies for the period 2000-2015. Panel regression method is employed in the study. Panel regression results show that market size, trade openness, infrastructure and political stability have a positive impact on the foreign direct investments in emerging market economies where macroeconomic instability has a negative effect. Although a significant relationship between labor costs and the direct foreign investments is not detected, a negative effect of global financial crisis on the foreign direct investments is found. The findings show that countries with a higher level of income per capita, openness in foreign trade, robust infrastructure and macroeconomic stability are the centers of attraction for direct foreign investors. Moreover, progress in the legal system and property rights of the countries affect the foreign direct investments positively. Key Words: Foreign Direct Investment, Emerging Market Economies, Panel Data Analysis