FDI Flows to Low-Income Countries: Global Drivers and Growth Implications

June 1, 2010

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FDI Flows to Low-Income Countries: Global Drivers and Growth Implications, (USA: International Monetary Fund, 2010) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

What accounts for variations in FDI flows from advanced to developing countries? How have FDI inflows explained cross-country growth experiences? In this paper we tackle both these questions empirically for a large sample of middle and low-income countries. Two key results emerge: (i) lower borrowing costs and positive real-side external factors were increasingly important drivers of FDI outflows to low-income countries in the pre-crisis period; (ii) economic fundamentals, the strength of economic reforms, and commitment to macroeconomic discipline are crucial determinants of the growth dividends of FDI. Our paper suggests that low-income countries can turn to domestic policy solutions to mitigate the adverse effects of a potential decline in FDI in the post-crisis world.

Subject: Emerging and frontier financial markets, Financial sector development, Foreign direct investment, Plurilateral trade, Real interest rates

Keywords: FDI flow, FDI inflow, FDI outflow, Low-income country, Source country, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/132
Stock No:

WPIEA2010132
ISBN:

9781455201150
ISSN:

1018-5941

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