Determinants of foreign direct investment inflows: The role of economic policy uncertainty
Canh Nguyen (),
Binh Nguyen Thanh (),
Su Dinh Thanh and
International Economics, 2020, vol. 161, issue C, 159-172
This article investigates the impacts of the domestic economic policy uncertainty (EPU) and the World Uncertainty (WUI) on net foreign direct investment inflows (FDI) for 21 economies over the period 2003–2013. By using the sequential (two-stage) technique of linear panel data models, this study provides two major results. First, the growth rate of domestic EPU adversely affects FDI inflows. Second, when combined with the domestic EPU level, the World Uncertainty (WUI) that includes the economic policy uncertainty measure of 143 countries has a positive impact on the FDI inflows into the host country. The findings suggest that although domestic economic policy uncertainty has an adverse effect on FDI inflows; an increase in the global (world) economic policy uncertainty could increase FDI inflows into the country. We explain this systematic aversion to global uncertainty through the existence of a behavioural bias (anchor and adjustment) illustrating the investors’ sensitivity to their ability to associate a frame to uncertainty.
Keywords: FDI inflows; Domestic and global economic policy uncertainty; Sequential (two-stage) estimation (search for similar items in EconPapers)
JEL-codes: F21 D81 E02 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:161:y:2020:i:c:p:159-172
Access Statistics for this article
International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga
More articles in International Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().