AN EMPIRICAL ANALYSIS OF THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT TO G-20 COUNTRIES

Abstract

Foreign investment has become a powerful tool for acquiring external capital, which has a positive effect on the host country's development. Depending on the kind of foreign direct investment, these financial flows might take the shape of reinvestment of debt, equity, or earnings transactions. This study aimed to demonstrate the significant factors influencing FDI in G-20 developing nations. This research employed a positivist viewpoint. The researcher used a deductive hypothesis methodology for this investigation. In deductive research, the hypothesis undergoes testing. This quantitative study is grounded on a theoretical framework and an extensive literature review. The quantitative method facilitates the systematic measurement of variables and the testing of hypotheses. The data for this research was sourced from G-20 nations. The G-20 countries consist of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, United States and European Union. There are 580 observations in the dataset that was utilized for this research. This research utilized data spanning from 1994 to 2022. The researchers gathered data about all variables from the World Development Indicators (WDI). The variable of interest, often referred to as the dependent variable in this study, is foreign direct investment (FDI). The independent variables for this research study include economic growth (GDP), inflation, exchange rate, interest rate, and technological innovation. Employing various empirical methodologies, including descriptive statistics, correlation matric, variance inflation factor, and GMM the results of the study are following. Exchange rates, interest rates, and GDP generally have a positive influence on foreign direct investment (FDI). Conversely, the impacts of inflation are negative.