Potential Developing Countries for Foreign Direct Investment: A Panel Data Analysis

Abstract

Foreign direct investment is considered an important tool for accelerating economic growth and development. This study aims to identify the potential developing countries for foreign direct investment. The study uses a panel data of 30 countries from 13 regions of the world for the period 1995-2015. The estimation results highlight ten factors that significantly affect the inflow of foreign direct investment. The estimation of FDI potential identifies seventeen developing countries out of 30 countries that should have higher FDI inflows than actual, based on their development level and economic performance. Based on the results of the model, the study urges policymakers to focus on identified macroeconomic factors to attract greater foreign direct investment in the country.