FDI Flows to Low-Income Countries: Global Drivers and Growth Implications

International Monetary Fund

No 2010/132, IMF Working Papers from International Monetary Fund

Abstract: What accounts for variations in FDI flows from advanced to developing countries? How have FDI inflows explained cross-country growth experiences? In this paper we tackle both these questions empirically for a large sample of middle and low-income countries. Two key results emerge: (i) lower borrowing costs and positive real-side external factors were increasingly important drivers of FDI outflows to low-income countries in the pre-crisis period; (ii) economic fundamentals, the strength of economic reforms, and commitment to macroeconomic discipline are crucial determinants of the growth dividends of FDI. Our paper suggests that low-income countries can turn to domestic policy solutions to mitigate the adverse effects of a potential decline in FDI in the post-crisis world.

Keywords: WP; FDI flow; low-income country; FDI outflow; FDI inflow; source country (search for similar items in EconPapers)
Pages: 38
Date: 2010-06-01
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2010/132

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