The importance of geopolitical risk and institutional quality indicators on foreign direct investment to brics countries

Abstract

Increasing geopolitical risks and deteriorated institutional quality could be an important obstacle on economic development, especially for developing countries. This study is aimed to examine the long run impacts of geopolitical risk and institutional quality indicators on Foreign Direct Investments (FDI) in BRICS countries during 1992-2019 with using dynamic panel data estimators. According to the findings, increasing geopolitical risk has a significant and negative impact on FDI inflows while improvements in rule of law and equal distribution of resources have significant and positive impacts on FDI inflows. Besides, long run elasticity findings revealed that developments in institutional quality have a relatively a strong impact on FDI compared with the adverse impact of increasing geopolitical risks.