Interconnection Analysis of Foreign Investments With Macroeconomic and Stock Market Indicators

he study is designed to examine modern economic and financial determinants of direct and portfolio foreign investment flows to Russia during 2005-2019. Foreign direct investment is one of the drivers of economic growth that can mobilize country's domestic resources. There has been a predominantly negative dynamics in the foreign direct investment flows with highly volatile portfolio flows. Financial determinants studied in this paper show the presence and strength of the linkages between the stock indices of Russia and G7, BRICS countries. To estimate the linkages between stock markets, the multivariate GARCH-BEKK model is used. Then the impact of these stock indices and economic factors on the direct and portfolio foreign investments in Russia using VAR models is measured. As an outcome of this paper, key macroeconomic indicators were identified separately for direct and portfolio investments flows. It is also was proven for foreign portfolio flows that they are highly depend on US and BRICS stock markets.