Trends and Drivers of Bilateral FDI Flows in Developing Asia
30 Pages Posted: 16 Jul 2008 Last revised: 6 Sep 2022
Date Written: June 1, 2008
Abstract
This working paper was written by Rabin Hattari (George Mason University) and Ramkishen S. Rajan (George Mason University).
Developing countries are rapidly emerging as new and important sources of foreign direct investment (FDI) to other developing countries. While Asian companies have become significant foreign direct investors abroad, a large share of outward investments from Asia appears to have been recycled intraregionally. However, unlike trade flows, there has been little to no detailed examination of FDI flows between Asian economies at a bilateral level. This paper uses bilateral FDI flows data to investigate trends and patterns of intra-Asian FDI flows over the period 1990 to 2005. It also employs an augmented gravity model framework to examine the main determinants of intra-Asian FDI flows. A range of drivers of FDI flows, including transactional and informational distance (proxied by distance), real sector variables, financial variables and institutional quality are examined.
Keywords: Developing Asia, Distance, Foreign direct investment (FDI), Institutions, Intra-regional, Gravity model
JEL Classification: F21, F23, F36
Suggested Citation: Suggested Citation
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