Understanding German FDI in Latin America and Asia: A Comparison of GLM Estimators

Mariam Camarero, Laura Montolio and Cecilio Tamarit
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Laura Montolio: Department of Applied Economics II, University of València and INTECO, Av. dels Tarongers, s/n Eastern Department Building, E-46022 Valencia, Spain

Economies, 2020, vol. 8, issue 1, 1-18

Abstract: The growth of Foreign Direct Investment (FDI) in developing countries over the last decade has attracted an intense academic and policy-oriented interest for its determinants. Despite the gravity model being considered a useful tool to approximate bilateral FDI flows, the literature has seen a growing debate in relation to its econometric specification, so that which is the best estimator for the gravity equation is far from conclusive. This paper examines the determinants of German outward FDI in Latin America and Asia for the period 1996-2012 by evaluating the performance of alternative Generalized Linear Model (GLM) estimators. Our findings indicate that Negative Binomial Pseudo Maximum Likelihood (NBPML) is the estimator best matched to our data, followed by Gamma Pseudo Maximum Likelihood (GPML). Furthermore, German FDI in Latin America is found to be predominantly vertical in nature, whereas that in Asia is mainly market-seeking.

Keywords: FDI determinants; outward foreign direct investment; Germany; gravity models; generalized linear models (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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