Asymmetric Effects of Commodity Prices on Foreign Direct Investment in a Commodity‐Exporting Economy

This paper examines the effects of global commodity price movements on foreign direct investment (FDI) inflows in Mongolia, heavily dependent on commodity exports. Estimating linear and nonlinear autoregressive distributed lag (ARDL) models based on a push‐pull framework, and controlling for both global and domestic factors, we find evidence of asymmetric effects of global commodity prices on FDI inflows (as a share of GDP). Specifically, negative commodity price shocks generate stronger long‐run responses in FDI inflows than positive shocks. The finding highlights that FDI inflows play a state‐dependent accelerator role in the transmission of commodity price shocks. Moreover, the domestic pull factors (such as growth, consumer prices, real exchange rate, and the government's external debts) have statistically significant and theoretically consistent long‐run effects on FDI inflows.