Determinants of private capital flows into Asia developing countries
Abstract
This thesis employs a fixed effects approach to analyze the determinants of two types of
private capital flows: foreign direct investment and portfolio equity investment, into Asia
developing countries. The model of each type is built separately based on their specific
theories and empirical studies to capture the most important factors as much as possible.
Using the data from the period 2005-2012, we find that market size, trade openness,
market growth, and even the poor economic governance, are strongly contribute foreign
direct investment inflows, while the factors positively influence portfolio equity inflows
are equity market size and exchange rate volatility. In addition, the analysis gets two
surprising results contradict to the theories and previous empirical studies, which require
further investigation. One is infrastructure development, measures by telephone line per
100 people, has negative and significant impact on foreign direct investment inflows at
1% level. The other is equity liquidity, measures by value of stock traded to GDP, has
negative and significant impact on portfolio equity inflows at 10% level