The determinants of foreign direct investment: An extreme bounds analysis

Eight determining variables of FDI inflows are examined by applying extreme bounds analysis to a cross-sectional sample encompassing data on 138 countries. With GDP serving as the free variable, seven variables are considered as the variables of interest in combination with three other variables. The results reveal three robust variables: exports as a percentage of GDP, telephone lines per 1000 of the population and country risk. One conclusion emerges: developed countries with large economies, a high degree of openness and low country risk tend to be more successful than others in attracting FDI.