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Failure Task Force Report: Phase III. The results presented below were estimated in

linear form, because experimentation with the loglinear-form produced inferior results.

Variable

WTSLS

GMM

Coefficient

Coefficient

Table 2: Estimation Results (1980 – 2002) FDI Equation

Table 2 presents the empirical results of the model.

3.3

Empirical Results and Interpretation

Consta

nt

-4.644(-0.516)

-16.868(-2.184)*

LAB

0.230(0.477)

0.992(2.002)*

OPEN

0.025(0.746)

0.108(2.703)*

FDI

0.377(0.840)

0.042(0.192)

REAL

-0.001(-0.318)

-0.001(-0.227)

GDI

-0.460(-1.221)

-0.375(-1.769)

Numbers in bracket beside coefficients are the corresponding t-statistics. * denotes statistical significance at the 5 percent level.

As seen from Table 2, most of the coefficients of the estimated equations have the right

signs and are significant at conventional levels. From the FDI equation, we find that

foreign direct investment is positively related to per capita income of the host country.

This variable is statistically significant at 10 per cent level. There is also a positive

Constant

3.080(-0.507)

-1.425(-0.454)

GDPPC

0.024(1.794)

0.020(2.540)*

GDPGR

0.484(1.458)

0.627(3.254)*

RI

-0.014(-0.138)

-0.010(-0.144)

DEBSR

-0.492(-1.120)

-0.530(-3.944)*

INF

-0.001(-0.017)

-0.004(-0.072)

PUB

0.531(2.172)*

0.428(3.059)*

POL

-6.507(-2.360)*

-5.349(-4.244)*

Adjusted R-squared = -0.734

Adjusted R-squared = -1.049

Durbin Watson statistic = 1.939

Durbin Watson stat = 2.065

Adjusted R-squared = 0.062 Durbin Watson statistic = 1.852

Adjusted R-squared = 0.062 Durbin Watson stat = 1.852

Growth Equation

correlation between foreign direct investment and the growth rate of the host country’s

economy. However, this variable is not a statistically significant determinant of foreign

17

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