ALTERNATIVE ESTIMATORS FOR THE FDI GRAVITY MODEL: AN APPLICATION TO GERMAN OUTWARD FDI

Mariam Camarero, Laura Montolio and Cecilio Tamarit
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Laura Montolio: University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain

No 1907, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: Despite the sound theoretical foundations of FDI gravity models and its popularity in empirical studies, there is a lack of consensus regarding the econometric specification and the estimation of the gravity equation. This paper provides a comprehensive empirical evidence of the determinants of German outward FDI comparing several estimation methods in their multiplicative form. We use four versions of the Generalized Linear Model (GLM), namely, Poisson Pseudo Maximum Likelihood(PPML), Gamma Pseudo Maximum Likelihood (GPML), Negative Binomal Pseudo Maximum Likelihood (NBPML) and Gaussian-GLM. The results of the empirical application indicate that NBPML is the best performing estimator followed by GPML.

Keywords: FDI determinants; Outward Foreign Direct Investment; Germany; Gravity models; Generalized linear models (search for similar items in EconPapers)
JEL-codes: C13 C33 F21 F23 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-ecm, nep-eec, nep-int and nep-ore
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eec:wpaper:1907

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