Effect of Foreign Direct Investments on the Domestic Investments of Developing Countries: A Dynamic Panel Data Analysis i

Abstract

Foreign Direct Investments (FDI) are regarded as a significant source of investment in developing countries. However, FDI may affect domestic investments in different aspects. They can enforce the domestic firms to crowd out or crowd in of the sector. In this study; the effects of FDI on developing countries was examined by means of dynamic panel data analysis for 30 developing countries using 1992-2010 period data. According to the empirical analysis results; FDI have crowding in effects in Asian, Latin American and Caribbean countries, although they have crowding out effects in the African developing countries.