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Foreign Direct Investment and Trade Openness: The Case of Developing Economies

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This paper examines the importance of trade openness for attracting Foreign Direct Investment (FDI) inflows, using a sample of 36 developing economies for the period 1990–2008. It provides a direct test of causality between FDI inflows, trade openness and other key variables in developing regions of the world: Latin America, Asia, Africa, CIS (Commonwealth of Independent States) and Eastern Europe. Trade openness is measured by using eight different indicators. The main empirical findings of the panel regression analysis reveal that in the long run, trade openness contributes positively to the inflow of FDI in developing economies.

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We thank an anonymous reviewer and the editor of this journal for helpful comments and suggestion on previous version of this paper. All errors remain in our responsibility.

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Correspondence to Panagiotis G. Liargovas.

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Liargovas, P.G., Skandalis, K.S. Foreign Direct Investment and Trade Openness: The Case of Developing Economies. Soc Indic Res 106, 323–331 (2012).

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