Examining the Determinants of Foreign Direct Investment in BRICS

Purpose: The study’s objectives were twofold. Firstly, to examine the determinants of foreign direct investment in BRICS (Brazil, Russia, India, China, South Africa).  Secondly, the study explored whether the complementarity between trade openness and infrastructural development was one of the drivers of foreign direct investment inflows into BRICS during the period under study. Design/Methodology/Approach: The study used fixed effects, dynamic ordinary least squares (dynamic OLS) and the fully modified ordinary least squares (FMOLS) with data ranging from 1994 to 2020. Findings: Trade openness (FMOLS, dynamic OLS, fixed effects), economic growth (FMOLS) and exchange rates (fixed effects, FMOLS) were found to have had a significant positive effect on foreign direct investment inflow into BRICS. The study also noted that the influence of inflation (fixed effects), financial development (fixed effects, FMOLS) and human capital development (FMOLS, fixed effects) on foreign direct investment was significantly negative. Implications/Originality/Value: To attract more foreign direct investment inflows into their countries, BRICS authorities are urged to develop and implement policies geared towards enhancing trade openness, economic growth and strength of their local currencies.