Examining the Regional Aspect of Foreign Direct Investment to Developing Countries

This paper applies a general-to-speci\u85c analysis to detect regularities in the driving forces of foreign direct investment (FDI) that can explain why some regions are more attractive to foreign investors than others. The results suggest that re-gional di¤erences in FDI inows to African, Asian and Latin American countries can be fully explained by structural characteristics rather than \u85xed regional e¤ects. The implication of this \u85nding is that countries that are lagging behind other de-veloping countries in attracting foreign capital have the opportunity to implement policies aimed at improving the investment climate for foreign investors. This also means that there is no African bias. Among a large number of return and risk variables applied in the empirical literature, growth and ination turn out to be the only robust and signi\u85cant FDI determinants across regions although the size of their impact varies