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

Zühal Kurul

International Review of Economics & Finance, 2017, vol. 48, issue C, 148-160

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.

Keywords: Foreign direct investment flows; Institutions; Dynamic panel threshold regression; Developing economies (search for similar items in EconPapers)
JEL-codes: C23 D73 F21 P48 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:48:y:2017:i:c:p:148-160

DOI: 10.1016/j.iref.2016.12.002

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