The macroeconomic, demographic, and environmental determinants of foreign direct investment in G20 countries

This study examines the factors influencing Foreign Direct Investment (FDI) across G-20 countries from 1990 to 2023, focusing on macroeconomic, demographic, infrastructural, and sustainability-related drivers. Using the Pooled Mean Group (PMG) estimator, along with Mean Group (MG) and Common Correlated Effects (CCE) estimates for robustness, the analysis finds that GDP and debt burden have a negative impact on FDI, indicating that high economic saturation and sovereign risk discourage foreign investment. In contrast, population size, shipping connectivity, human capital, and energy efficiency exhibit a positive influence on FDI, highlighting the importance of market size, infrastructure quality, skilled labor, and sustainable energy practices in attracting foreign capital. The findings challenge the conventional view that larger economies are always more attractive for FDI and underscore the complex relationship between economic growth, sustainability, and investment flows. The study concludes with policy recommendations for G-20 nations to prioritize human capital development, infrastructure improvement, and energy efficiency to foster sustainable FDI and maintain global competitiveness.