A PANEL ANALYSIS FOR DETERMINING THE VARIABLES AFFECT FDI INFLOWS TOWARDS FRAGILE FIVE COUNTRIES

Globalization is increasing since the mid-1990s. Along with the globalization, increased internationaltrade caused the foreign direct investment (FDI) inflows for economies. Economists often emphasize that FDIcontributes developing countries to confront the international competition by boosting their economy, increasingproductivity and export capacity. This paper aims to investigate the factors that affect the FDI flows towards theFragile Five countries (Turkey, Brazil, India, Indonesia, South Africa) for 1994-2017 through panel data analysis.The results from the panel ordinary least square indicate that political freedom as a proxy variable of institutionalquality, real exchange rate, and the degree of productive knowledge and capability of the Fragile Five countriesare statistically significant determinants of FDI attraction. Thus, developing countries, aiming to increase FDIinflows have to strengthen their political conditions and stabilization of their exchange rates. As well as, it isimportant to increase these countries’ export shares of the more complex product in order to be able to attractmore FDI.