Determinants of Growth in FDI in BRICS Nations

Abstract

Purpose: The study aims to determine the driving forces i.e. macroeconomic variables in the growth rate of the FDI in BRICS nation.

Design/ Methodology/ Approach: The forces that have been taken in the study are Foreign Direct Investment, Employment rate, Government Final Consumption Expenditure, Inflation Rate, Interest rate and GDP in the economy. Panel regression has been applied in the study as the data set is a mixture of time series and cross sectional units. The time period for the study ranges from 2000 2018. In addition to the results of the above model, descriptive statistics and correlation matrix for all the variables are also given in the study to examine the nature of the variables.

Findings: The panel results indicate that the variables chosen for the study have a significant impact on the FDI growth rate of the BRICS economies. The extent of their impact is reported by the beta values calculated in the study. Further, the correlation matrix signifies the existence of relationship between variables undertaken in the study. The findings are in consistence with the literature.

Research limitations: Only few variables have been taken up for the study. Further, the results with Interest, Inflation and Government expenditure in its other forms may give different results.  

Practical Implications: The results can be used for financial planning and framing of the Macroeconomic policies of the Nations to make a rise in their FDIs. Further, the comparison made of all the major macro variable indicators for all the countries will motivate the economies to improve their position in all the terms in comparison to the other nations in the BRICS.

Key Words: Panel Data, BRICS, FDI, Government Expenditure, GDP