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

Institute for Monetary and Financial Research, Hong Kong, Trends and Drivers of Bilateral FDI Flows in Developing Asia (June 1, 2008). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 11/2008, Available at SSRN: https://ssrn.com/abstract=1160940 or http://dx.doi.org/10.2139/ssrn.1160940

Hong Kong Institute for Monetary and Financial Research (Contact Author)

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