Profitability Life Cycle of Foreign Direct Investment: Application to the Czech Republic

Filip Novotný

Emerging Markets Finance and Trade, 2018, vol. 54, issue 7, 1623-1634

Abstract: The decisions of foreign direct investors are profit-seeking, so deterioration in the primary income balance of the current account is observed. We estimate the common profitability profile of foreign direct investment (FDI) on a panel of mostly European countries in the period from 1990 to 2015. The FDI profitability life cycle has a non-linear time profile with duration of 16 years. Maximum profitability is reached in the sixth year after the initial investment. We then construct three scenarios for the evolution of total FDI earnings in the Czech Republic depending on the future FDI inflows (changing FDI stock) assumed.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:54:y:2018:i:7:p:1623-1634

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DOI: 10.1080/1540496X.2017.1316259

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