No abstract

The studies of the relationship between foreign direct investment and domestic investments indicate that the findings are mixed and controversial. This study argues that some of the conflicting evidence may be related to the ignorance of financing structure of foreign direct investments in the host market. Foreign investment can be financed as a mixture of three components (equity capitals, reinvested earnings, and intra-company loans). Thus, crowding out or crowding in effect of foreign investments on local investments may be determined by the choice of investors to finance the foreign capital in the host country. The main objective of this study is to find out the impact of foreign investment inflows on domestic investments for 30 Organization for Economic Cooperation and Development (OECD) countries from 2006 to 2013 by employing one-step Generalized Method of Moments system. We have empirically confirmed that while total foreign direct investment inflows do not have a significant effect on overall domestic investments, intra-company loans as sub-component of total foreign direct investments, do indeed, have a positive effect on domestic capital formations.

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Despite the growing interest in foreign direct investments (FDI), substantial uncertainty still exists regarding what stimulates foreign investors to operate in a foreign market and uneven distribution of FDI across countries. Using panel data for 2001-2012 period, the major determinants of the FDI inflows into the Central and Eastern European Countries are analysed in this study. Strong evidence are found that while EU CR indices, EU and USA real GDP growth rates and global financial crisis have power to explain FDI inflows among all other push factors, labour cost, electricity price, real exchange rate and host CR indices have strong influential on FDI as the most effective pull factors. However, study fails to find any effect of openness, tax rates on commercial profits, USA CR indices, interest rate differentials and host real GDP growth on FDI.