What drives German foreign direct investment? New evidence using Bayesian statistical techniques |
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| Affiliation: | 1. University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain;2. University of Valencia and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building, E-46022 Valencia, Spain;1. Accident Compensation Corporation, Wellington, New Zealand;2. School of Economics, Finance and Marketing, RMIT University, Building 80, Level 11, 445 Swanston Street, Melbourne, VIC 3000, Australia;1. School of Economics and Management, Beihang University, Beijing, 100191, China;2. College of Business, University of Nevada, Reno, Reno, NV 89557, USA;1. School of Data Sciences, Zhejiang University of Finance and Economics, Hangzhou, Zhejiang, 310018, PR China;2. Department of Statistics, The University of British Columbia, Vancouver, BC, Canada;1. Centre for Financial Econometrics, Deakin Business School Deakin University, 221 Burwood Highway Burwood, Victoria, 3125, Australia;2. Faculty of Economics and Business, Universitas Airlangga, JI. Airlangga 4 Surabaya, Indonesia;1. Universidad Catolica de Murcia, Avda. Los Jerónimos, 135, 30107 Murcia, Spain;2. Instituto Flores de Lemus, Spain;1. Faculty of Economics, Chulalongkorn University, Bangkok, Thailand;2. Department of Econometrics and Business Statistics, Monash University, Victoria, Australia |
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| Abstract: | Despite the importance of Germany as an issuer of foreign direct investment (FDI), the studies analyzing its determinants are far from conclusive. This research contributes to filling this gap providing new evidence for the period 1996–2012. In order to reduce model uncertainty, we adopt a Bayesian model averaging (BMA) approach. We find that determinants associated with horizontal FDI appear to be dominant for explaining FDI in developed countries while for the group of developing countries covariates associated with vertical FDI motives play a larger role. Within Europe, while the majority of FDI is horizontally driven in “core” countries, in the “periphery” vertical motivations seem to prevail. Moreover, our results are compatible with more complex FDI models where vertical determinants and institutional variables are gaining prominence as does the leading role currently played by Germany in global value chains (GVC). Our results may provide hints for policymakers’ strategies to attract German investment. |
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| Keywords: | FDI determinants Outward foreign direct investment Germany Bayesian model averaging Variable selection F21 F23 C11 C52 |
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