Abstract
This study reports on the establishment of an extensive and detailed composite dataset to support country-level econometric studies of FDI in Thailand. This has permitted investigation in detail, for the first time, of the key macroeconomic determinants of FDI in Thailand over the period 1970–2004. In particular, the influence of interest rates, exchange rates, volumes of trade, wage rates and geographical distance on FDI were considered and the results are reviewed in the context of other country studies.
Highlights
This study features the first major econometric analysis of the determinants of FDI in Thailand employing an approach that is strongly influenced by the work of Wei and Liu (2001)
It would seem that explaining differences in FDI to Thailand from the major investing countries by reference to the foreign plant or establishment A growing (Thai) macro-level economic policy is difficult and that in many respects it is the economic conditions in these countries that could be more important than policies implemented in Thailand
Careful consideration was given to the manner in which all variables might affect FDI to Thailand, in particular the distinction between push and pull factors, and attention was paid to problems of stationarity and estimation technique
Summary
This study features the first major econometric analysis of the determinants of FDI in Thailand employing an approach that is strongly influenced by the work of Wei and Liu (2001). This naturally supports the trends, and shows the steady decline of the share in FDI from the USA (with some clear cycles) as well as the increasing prominence of Singapore, the reasonably consistent percentage from Japan (excluding the peak in the mid 1980’s) and the rise and fall of the contribution from Hong Kong. It is possible that countries (or more precisely the residents of countries) differ in the extent to which changes in Thai economic conditions (and expectations about these changes) influence their inclination to change levels of FDI, but this overview of trends suggests that there may be a considerable element in the variations in FDI that will be difficult to explain. In view of the delays likely before plans for FDI can become realised, the desired level of FDI at time t was assumed to be related to the values of time-varying variables at time (t-1) as well as at time t.4 Table 1 provides a description of the key possible macroeconomic factors used as the explanatory variables
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