The determinants of FDI during 1992-2010 in the BRICS countries and the impact of the 2008 global crisis on these countries

The BRICS (Brazil, the Russian Federation, India, China and South Africa) economies, as the major emerging markets, continue to influence the transformation of the global structure. Their role within the global governance and global economy is increasing day by day. This study is an analysis of the determinants of foreign direct investment (FDI) in a panel of bilateral FOI data from thirty-two the Organisation for Economic Co-operation and Development (DECO) countries in the BRICS countries for the period of 1992 to 2010. Applying the extended gravity model with the home country push factors and the host country pull factors, the empirical findings of this study confirms that market size, distance, common culture, trade openness, privatisation, relative labor cost, research and development (R&D), relative exchange rate, infrastructure and institutional factors are the key determinants of FDI in the BRICS countries. Furthermore, bilateral investment treaties (BITs) are significant at 10% level for FDI flows. The home country corporate tax rate and bilateral export are inconclusive. In this aspect, there are evidences to accept that the motive of FDI in the BRICS economies is principally are market seeking, natural resource seeking and partly efficiency seeking type of FDI. Employing a standard gravity model, within limited scope this study also attempts to examine the impact of the 2008 global financial crisis on the BRICS countries' exports. The author use a panel data of BRICS countries' bilateral exports to the top ten major destination countries for the period of 2000 to 2011 by including a dummy variable to measure the impact of the global financial crisis. The result confirms that the coefficient estimate for the crisis dummy variable is positive and statistically significant at 1% level for fixed effects (FE) model. The result specifies that during the global financial crisis periods, the BRICS countries' exports growth rate increased relative to the non-financial crisis period. Furthermore, model approves that GOP growth rate and population are an also important factor that affects the value of the BRICS countries' exports.