The determinants of the outward foreign direct investment of China and India: Whither the home country?
Paz Estrella Tolentino
#2008-049
The current study examines the relationships between several home
country-specific macroeconomic factors and the level of the outward FDI
of China and India using multiple time-series data from 1982 to 2006 and
from 1980 to 2006, respectively. With the use of a vector autoregressive
model assessing the causal relationships of the endogenous variables,
the empirical research proves that Chinese national characteristics
associated with income per capita, openness of the economy to
international trade, interest rate, human capital, technological
capability, exchange rate and exchange rate volatility do not Granger
cause the level of outward FDI of China. By contrast, the national
technological capability of India Granger causes their level of outward
FDI. The level of outward FDI of China does not Granger cause any of the
home country-specific macroeconomic factors considered, while the level
of outward FDI of India Granger causes their national interest rate.
Key words: outward FDI; home country; FDI determinants; Chinese MNCs,
Indian MNCs, VAR model
JEL codes: F23, C32, C51
UNU-MERIT Working Papers
ISSN 1871-9872