The Effect of Macroeconomic Indicators on Foreign Direct Investment of BRICS Countries - An Insight into Econometric Models

This empirical study analyses the linkage between foreign direct investment of BRICS countries and macroeconomic Indicators for the period 2002-2003 to 2013-2014. The study aims to find the relationship between FDI of BRICS countries and macroeconomic indicators with the help of econometrics tools such as Unit Root Test Analysis, Johansen Co-integration test, Granger Casualty Test and Panel Data Regression Models such as Fixed Effect and Random Effect model). The analytical results revealed the long term relationship between FDI of BRICS countries and macroeconomic indicators during the study period. It is found that all the macroeconomic variables are co-integrated with FDI and variables such as log of Gross Capital Formation and Log of Trade Openness granger caused FDI of BRICS countries in bi-directional mode. It is also observed from the results that explanatory variables such as size, inflation, log of Gross Capital Formation, Log of Labour Cost, and Log of Trade Openness are having statistically significant relationship with FDI of BRICS countries.