Abstract:-

We identify the timings of exceptionally large inflows of foreign direct investment (FDI) which we call ‘FDI surges’ and examine the likelihood of these surge occurrences in a sample of 56 developing countries for the period 1990–2019. We employ two threshold criteria to identify the surge-years for each country. While the first approach identifies 298 surge occurrences the second approach provides 247 surge instances. Though most of the countries have experienced FDI surges during the sample period, the surge occurrences vary greatly across countries and over time. We find that South Asia region has the lowest surge incidences. The global (push) factors such as global risk aversion, and the domestic (pull) factors i.e., host country’s economic growth, trade openness (or capital openness), natural resources and inflation rate are statistically significant predictors of FDI surges. We find that countries with faster economic growth and rich in natural resources are more likely to experience FDI surges than slow growing and resource-scarce economies. Our results suggest that both the global factors and home country characteristics matter for FDI surges in developing countries. While the global factors are important in explaining FDI surges in developing countries in general, where the surge will happen depends on the recipient country characteristics. Our findings are robust to alternative model specification and estimation methods.