Abstract
We employed co-integration analysis to investigate the determinants of FDI inflows into Thailand for the period 1970 to 1996. Our findings show that the market size; the relative low labor cost; the degree of openness; the level of trade barriers; the user cost of capital differentials and the real exchange rate were the determinants of the aggregate FDI inflows. Regarding the components of FDI inflows, namely manufacturing and non-manufacturing FDI, our findings indicate that the manufacturing FDI was also responsive to factors related to the firm's capacity to export, including the relative labor cost, the degree of openness and the exchange rate. In contrast, the non-manufacturing FDI was mainly induced by the domestic demand and relative low labor cost of Thailand.
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