The components and determinants of FDI within firms: A case study of Zambia

Grivas Chiyaba ()
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Grivas Chiyaba: Department of Economics, University of Reading

No em-dp2021-09, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: This study investigates the response of the components of FDI flows to macroeconomic variables within firms. The analysis uses a new firm-level database constructed from anonymised confidential data held by the Zambian Central Bank, covering the period 2008 – 2017. Applying the fixed effects estimation method, the study confirms a positive association between FDI inflows and commodity prices. The study also confirms a positive correlation between reinvested earnings and exchange rate depreciation. Furthermore, the study accepts, but with a qualification, the preference for intra-company debt financing when there is policy uncertainty in a host country. However, the proposition of a positive relationship between equity financing and currency appreciation in the host country is rejected. The study proposes instead a new hypothesis, a negative relationship between equity financing and the exchange rate appreciation.

Keywords: Foreign direct investment; retained earnings; equity; intra-company debt; firm (search for similar items in EconPapers)
JEL-codes: E3 F23 F24 F31 H32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-05-07
New Economics Papers: this item is included in nep-int and nep-mac
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