Convergence Analysis of Foreign Direct Investment Performances of Countries in terms of Development Stages

Abstract

In this study, the countries / economies, according to the classification in terms of stages of development, the convergence behavior of foreign direct investment performance is analyzed. This study grounds on the Global Competitiveness Report 2012-2013 for classifying the development stages of countries/economies. In the aforementioned report, countries/economies are divided into three main groups according to their development stages. These groups are "factor-driven economies", "efficiency-driven economies" and "innovation-driven economies". Moreover, this number has climbed to five after adding two more groups including the economies between the first stage and the second stage and the economies between the second stage and the third stage. This analysis estimates the foreign direct investment performances of the countries in this classification and examines intra-group and inter-group convergence relations for the period of 1970-2012 by means of Asymmetric Exponential Smooth Transition Auto-Regressive (AESTAR) unit root test. The findings demonstrate that most countries display a significant convergence behavior towards the ensemble average and the ensemble averages converge towards each other.