Econometric Methods

Pratip Pradhan (0286/53)

Analysing Key Determinants of FDI in Harish Padigala (0267/53)

Developing Countries Kalpendu Rawat (0175/53)

Makam Anil Krishna (0212/53)
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Kadali Ramoji Rao (0174/53)
 Introduction
Foreign Direct Investment:
Ownership of an enterprise in one country by an entity based in another
country.

Developing Countries:
Nation or a Sovereign State with a less developed industrial base and a low
Human Development Index (HDI) relative to other countries.

Problem statement:
Analysing and Evaluating the key factors influencing FDI inflow in
developing countries

Motivation:
+ Importance of FDI for developing countries
Local productivity growth
Technology and soft skills development
Employment opportunities
+ World Economic Situation and Prospects, 2017
20% fall of total FDI to developing economies in 2016

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 Approach
Define the problem statement and conceptualise framework

Collect data on model parameters for developing countries

Organise and clean data to obtain final dataset for analysis

Visualise the final dataset using various charts and diagrams

Analyse data to validate assumptions and to test the fit of the

econometric model

Data sources:
http://data.worldbank.org/
https://www.bus.umich.edu/otpr/otpr/default.asp

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 Parameters Considered
GDP

Market Size Per Capita GDP

GDP Growth Rate

Labor Wages
Profitability
Taxes
Factors Affecting FDI
Inflow

Openness of Economy Trade as % of GDP

Infrastructure

Stability and Feasibility Political Stability

Country Risk Rating

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 Hypothesis

Hypothesis 1: H0: Market Size does not affect FDI inflows

Ha: Market Size has an impact on FDI inflows

H0: Labor Wages and Taxes do not affect FDI inflows

Hypothesis 2:
Ha: Labor Wages and Taxes affect FDI inflows

H0: Infrastructure does not affect FDI inflows

Hypothesis 3:
Ha: Infrastructure affects FDI inflows

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Way Forward

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 Descriptive Statistics
GDP growth Trade % of Ease of doing
FDI Inflation
rate GDP business (Index)

Mean 14,59,77,08,440 3.98 74.52 3.23 87.00

Standard Error 6,77,94,14,950 0.46 6.46 0.63 6.58

Median 3,14,50,09,998 4.14 61.91 2.54 81.00

Standard
41,23,75,71,237 2.78 39.26 3.75 40.01
Deviation
Sample Variance 1,70,05,37,28,15,16,39,00,00,000 7.72 1541.73 14.07 1600.94

Kurtosis 28 1.42 0.93 2.09 -0.60

Skewness 5 -0.62 1.17 1.37 0.37

Range 2,47,79,85,12,127 14.16 155.91 16.52 150.00

Minimum -5,30,91,80,499 -3.77 22.86 -0.99 22.00

Maximum 2,42,48,93,31,627 10.39 178.77 15.52 172.00

Sum 5,40,11,52,12,277 147.38 2757.13 116.23 3219.00

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Count 37 37.00 37.00 36.00 37.00
Way Forward

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