The Impact of Macroeconomic Variables on FDI Inflows in Selected Countries: Panel-Data Model

Abstract

The study examined the determinants of Foreign Direct Investments (FDI) inflows to the selected countries by using Panel- Data Model. The main objective of this study was to find out the major macroeconomic determinants of FDI in these countries during the study period. According to empirical results, all the variables such as Political stability, Balance of Payments (BOP), Inflation rates, and Exchange rate was statistically significant with high significant levels and considered as some important determinants of FDI flow to these countries, except economic growth variable. In this study we initially tested the unit root test, which includes test of Augmented Dickey- Fuller (ADF) and Phillips- Perron (PP) test, other test such as Pooled Ordinary Least Squares (OLS) Regression test, Fixed effect model, Random effect model, Hausman test, diagnostic tests, and Heteroscedasticity test. Based on the findings, we recommend that policies that encourage FDI, such as provide the political stability case, improve the situation of the balance of payments, moderate exchange rate depreciation, the stability of inflation rates, should be implemented. © Peter Lang GmbH.