Political and institutional determinants of FDI at the global level, Latin America and ASEAN

Abstract

This study analyzes the influence of political and institutional factors on Foreign Direct Investment (FDI) between 1996 and 2019. Based on a theoretical and empirical review, an explanatory model is delineated, examining the relationship between institutions, political risk, political regime and corruption, and FDI flows. It uses data from 170 countries globally, 26 Latin American countries, and 9 ASEAN (Southeast Asian Nations) countries for benchmarking. Advanced statistical techniques such as panel data, multiple imputations, and exploratory factor analysis were used, employing Python and R. The study shows a global relationship between governance and FDI, particularly in ASEAN, although global political polarization acts detrimentally. While corruption is negatively associated with FDI, in some regions, higher perceptions of corruption correlate with higher FDI. Furthermore, democracy attracts FDI globally but shows disparate trends in Latin America. The study concludes that contextualized policies and future research in emerging economies are needed