Cross-border Investments, Gravity Equations and the Double-hurdle Model
Institution: | University of Helsinki |
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Department: | |
Year: | 2015 |
Keywords: | Taloustiede |
Record ID: | 1141927 |
Full text PDF: | http://hdl.handle.net/10138/153567 |
In this thesis I consider studying the determinants of international investments with the gravity model of international financial asset trade. I discuss the relevant literature and present a theoretical framework for gravity in cross-border investments. I compare three empirical approaches, the classic approach that studies the determinants of the observed levels of cross-border holdings by a fixed effects panel model, the dichotomous approach that studies the effects of determinants on the probability of there being a positive cross-border investment by a probit model and finally an approach which combines the two previous ones by a double-hurdle model. I propose that the double-hurdle model is the correct approach in the context of cross-border investments.