International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Return to Capital and Foreign Direct Investment: A Cross-Country Perspective
John Vahaly, Nan-Ting Chou, Alexei Izyumov

Using newly available data, the paper estimates aggregate macroeconomic rates of return (ROR) for 109 countries divided into highly developed (HDC), less developed (LDC), and transition economy (TEC) groups. We then analyze the connection between the ROR and cross-country capital flows as measured by foreign direct investment (FDI). For the period of 1994-2014, we find statistically significant links between all measures of ROR and inflows of FDI associated with the prevalence of “downhill” capital flows across the world.

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