Spatial Regression Analysis of FDI and Economic Development: The World Perspective

Foreign direct investments (FDIs) play a vital role in promoting an open and effective international economic system and are essential for economic development. However, the benefits of FDI are not equally distributed across countries, sectors, and locations. Theoretical approaches highlight the significance of complex integration strategies of FDI inflows and the interdependence between locations. Yet, little attention has been paid to incorporating the potential cross-country dependencies into the empirical analysis of the determinants of foreign direct investment. Therefore, this paper aims to ex-amine the relationship between foreign direct investment and economic development, utilizing a spatial panel data technique. The empirical analysis uses panel data for 166 countries from 2001 to 2017. Our findings suggest a weak spatial dependence on foreign direct investment and economic development at the international level.