Trade Openness and FDI in the UK After Brexit

Foreign direct investment (FDI) has increased globally since the late 1980s. It increased rapidly in Cambodia in the past two decades. This paper aims to examine the determinants of inward FDI from China, South Korea and Japan and its contribution to economic growth in Cambodia during 1994-2014, using both time series analysis by country and the panel data analysis. The results on the determinants of FDI show that real GDP, bilateral trade between the countries, exchange rate, inflation rate, and relative labor productivity are statistically significant and have positive impact on inward FDI flows into Cambodia, and inward FDI from those three investing countries contribute to Cambodia?s economic growth respectively. The findings from the study on the impact of FDI indicate that there are positive relationships between inward FDI from China, South Korea and Japan and Cambodia?s economic growth. Labor force, domestic investment, human capital, infrastructure and trade openness are the important factors leading to economic growth in Cambodia when receiving inward FDI from those three investing countries. However, the positive effect on the Cambodia?s economic growth could have been greater if the country had greater capability to absorb advanced technology from the FDI. Besides, Cambodian policy makers should focus more on the policies that are friendly and attractive to inward FDI. Moreover, to attract more inward FDI, the government should promote encouraging environment for trade and investment for both local and foreign investors, remove restrictions against FDI and develop physical infrastructure. Finally, policy makers should not forget the development of human capital because the variable represents the absorption capacity from which the Cambodian economy could benefit from the FDI.

This study examines the relationship between foreign direct investment (FDI) inflow, trade openness, and the influence of FDI on economic growth. The threshold methodology and GMM estimation are employed to analyze panel data from 60 developing countries in the period between 1995 and 2019. This study demonstrates the positive impact of FDI on economic growth in developing countries. However, the study also finds a significant threshold of FDI inflow relative to GDP that changes the impact of inward FDI on GDP growth. Regarding the role of trade openness, a significant threshold is found, which also indicates the absorptive capacity of the host countries. Moving from below to above this threshold, an increase in FDI inflow leads to a lower increase in economic growth. An increase in FDI relative to GDP stimulates growth only when the host country has sufficient absorptive capacity with regard to trade openness above the threshold. We suggest developing countries tighten the coherence of trade liberalization and FDI attraction policies to obtain the benefits of FDI and make changes to attract new investors when they succeed in attracting massive FDI inflows.

Foreign direct investment (FDI) is a vital driver for economic growth in a country. Hence, FDI determinants should be identified in order to promote FDI. FDI could stimulate economic growth and economic growth could attract FDI. This study examines foreign direct investment (FDI) determinants in the main manufacturing sectors and the impact of FDI on economic growth in Malaysia. Moreover, this study examines the link between FDI and real national income.  The vector error correction model (VECM) is used to estimate FDI determinants and the link between FDI and real national income. The results of the vector VECM show that the coefficients of real exchange rate are found to have positive impact on FDI. The coefficients of real national income, trade openness and real infrastructure are mostly found to have positive impact on FDI whilst the coefficients of real average wage and financial development are mostly found to have negative impact on FDI. Autocracy and polity are found to be significant determinants for many manufacturing sectors in the short run. Inflation is found to influence negatively FDI in the transport equipment sector. The Asian financial crisis, 1997-1998 is found to have influential impact on FDI in the petroleum products sector and the chemical and chemical products sector. These findings reveal that FDI determinants are not exactly the same for all the manufacturing sectors. Therefore, FDI would be attracted through a variety of policies. FDI is found to Granger cause real national income for the basic metal products sector and the chemical and chemical products sector whilst real national income is found to Granger cause FDI for the petroleum products sector. These findings demonstrate that FDI and economic growth are closely related. FDI can sustain economic growth in Malaysia. FDI is crucial for economic growth. &nbsp

Vietnam's phenomenal economic development has coincided with a substantial increase in FDI inflows and hence led researchers, including the author, to believe that increased inflows of FDI into Vietnam have had important implications for the country's trade and economic expansion over the past decades. This dissertation investigates factors determining foreign direct investment (FDI) inflows and the effects of FDI inflows on economic growth and trade in Vietnam and its different regions over the 1993-2006 period. The study reveals that wages, income per capita, GDP growth and accumulated FDI stock as well as openness to trade and special economic zones are important factors attracting FDI inflows into Vietnam. Human capital has not yet been a significant factor determining FDI inflows because FDI activities in Vietnam are mainly in labor-intensive industries in which a large number of skilled labor is not yet required. The existing physical infrastructure in Vietnam does not help attract FDI inflows either and this implies that an improvement in its quality is needed. Economic growth and FDI in Vietnam have a positively significant relationship. The beneficial effect on growth of FDI comes from stock of foreign capital that has been accumulated over the years. At the regional level, higher capital flow of foreign direct investmentis a major factor stimulating economic growth in the Northern region. The flow of superior technologies transferring from FDI firms can also help to increase the growth rate of the Central region by interacting with the region's open trade regime. The contribution of FDI to economic growth in the Southeastern region is explained by both foreign capital accumulation and new technologies and knowledge transferred from FDI enterprises through human capital. In all regions, inward FDI has a complementary relationship with Vietnam's exports, imports and total trade, implying that the FDIs are mostly of the vertical type. However, the patterns of the FDI-trade relationships between Vietnam and different partner countries show variations. To attract more FDI inflow into Vietnam and sustain the economic development, Vietnam has to improve the country's income per capita, GDP growth rate and trade openness. The Vietnamese government needs to pay more attention to improved quality of human capital, physical infrastructure as well as putting effect to enhance the investment environment in order to attract FDI inflows into a more tecnology-intensive line of production in the future.

The study at hand is the first of its kind that aimed to provide a comprehensive analysis of the determinants of foreign direct investment (FDI) in Mongolia by analyzing their short-run, long-run, and Granger causal relationships. In doing so, we methodically used a series of econometric methods to ensure reliable and robust estimation results that included the augmented Dickey-Fuller and Phillips-Perron unit root tests, the most recently advanced autoregressive distributed lag (ARDL) bounds testing approach to cointegration, fully modified ordinary least squares, and the Granger causality test within the vector error-correction model (VECM) framework. Our findings revealed domestic market size and human capital to have a U-shaped relationship with FDI inflows, with an initial positive impact on FDI in the short-run, which then turns negative in the long-run. Macroeconomic instability was found to deter FDI inflows in the long-run. In terms of the impact of trade on FDI, imports were found to have a complementary relationship with FDI; while exports and FDI were found to be substitutes in the short-run. Financial development was also found to induce a deterring effect on FDI inflows in both the short- and long-run; thereby also revealing a substitutive relationship between the two. Infrastructure level was not found to have a significant impact on FDI on any conventional level, in either the short- or long-run. Furthermore, the results have exhibited significant Granger causal relationships between the variables; thereby, ultimately stressing the significance of policy choice in not only attracting FDI inflows, but also in translating their positive spill-over benefits into long-run economic growth.

Nearly all developing countries actively seek capital and technology from the advanced countries. Although private direct foreign investment (mainly in the form of multinational enterprise) is viewed with ambivalence by many developing countries, it is nonetheless true that direct investment remains a substantial source of capital and is sometimes the only source of specific technologies. Indeed, given the slow growth in official external assistance, developing countries are becoming more, not less, dependent on direct foreign investment. While disbursements of official development assistance by the OECD countries rose 43% from 1961 through 1970, direct investment flows rose almost 90% over the same period. In the later year, the flow of direct investment was more than two-fifths of all official assistance, $3.2 billion compared to $7.8 billion.1 Furthermore, the United States and other major capital exporting countries would prefer, for economic as well as ideological reasons, to channel more of their capital outflows to developing countries through private investment. It is highly probable, therefore, that developing countries will continue to rely on direct foreign investment in the foreseeable future to carry out their development programs. It is against this background that the present study seeks to identify the empirical determinants of direct foreign-investment flows in the manufacturing sectors of developing countries. Our purpose is to select from the many economic, social, and political features of a developing country those features that are critical to making that country attractive or unattractive to private foreign investors. Available empirical studies are limited

Cape Verde has attracted high Foreign Direct Investment (FDI) flows in the last 15 years. Although there is growing literature on the determinants of FDI in developing countries, only a few studies are available addressing African countries. This paper aims to fill this gap and identify the main economic and political determinants of FDI in Cape Verde, a small African country. The analysis is based on data from 1986 to 2019 concerning several macroeconomic and political variables that are potential determinants of Cape Verde's FDI inflows. Firstly, several unit root tests are run, such as the Augmented Dickey-Fuller, Dickey-Fuller-GLS, Phillips-Perron and KPSS tests. As the time series are generally integrated, they are tested for cointegration using Johansen's maximum-eigenvalue and trace tests. Then, a vector error correction model (VECM) is fitted to the data and its goodness-of-fit is satisfactory, enabling the estimation of a long-run regression equation for the FDI, our primary purpose. The fitted model concludes that market growth, macroeconomic instability, infrastructures, political stability, and trade openness are important determinants of FDI inflows. As expected, all but macroeconomic instability have a positive impact on FDI, which means that: economic growth attracts FDI; macroeconomic instability deters FDI; a country with good infrastructure quality can attract larger FDI inflows; a country's political stability brings larger FDI inflows; trade openness also induces FDI, and its impact is quite strong. Furthermore, the estimate of FDI's speed of adjustment or error correction towards the equilibrium is 0.16 percentage points. Maximizing the benefits of FDI requires policymakers to implement appropriate domestic policies. Thus, the above determinants have to be regarded as crucial competitiveness tools for Cape Verde's success as an FDI host country, namely boosting economic growth and ensuring its sustainability, keeping price (macroeconomic) stability, investing in building infrastructures and developing Information and Communication Technologies, ensuring political stability and good government practices, and implementing reforms towards a more export-oriented trade regime.

Purpose – The purpose of this study is to identify the main drivers which can explain the relative success of BRIC countries (i.e. Brazil, Russia, India and China), collectively and individually, in attracting foreign direct investment (FDIs). Unlike previous studies that have identified gross domestic product (GDP) as a major determinant, we find that for the sampling period 1980-2008, social variables (namely, high population growth and educated labor) and political variables account for 40 and 7 per cent of the variance in net inward FDI, respectively, and no importance for economic variables. Interestingly, for a sub-period (1999-2008), we observe the salience of financial (namely, sizable GDP economy, favorable net trade balance and controlled currency risk and sovereign debt risk) determinants of inward FDI (R2 is 44 per cent). On the other hand, when testing individual countries, it seems that FDI determinants are not universal as each country enjoys different characteristics and sources of strengt...

Previous studies on the determinants of foreign direct investment (FDI) have predominantly focused on developed and emerging economies. However, there seem to be few studies concentrating on a comparative analysis of vast African and Asian countries. This paper analysed drivers of foreign direct investments (FDI) to Asian and African economies using a panel dataset from 1980 to 2013.This study used Granger causality test, under vector error correction modelling (VECM) to test for causality among the variables. While the drivers of FDI inflows were measured using five dimensions as proposed by Anyanwu; the dependent variable, FDI inflows, was proxied by the ratio of FDI flows to gross domestic product (GDP). Findings revealed that variables manifesting the determinants of FDI inflows positively affected FDI into these continents. Specifically, factors such as trade openness, macroeconomic condition, infrastructural development, and monetary union have positive and significant effect on FDI to Asian economies. No significant relationship was found between FDI inflows and market size to the Asian continent during the study period. On the other hand, trade openness, macroeconomic condition, market size and infrastructural development have positive and significant effects on FDI inflows to African economies although there was no significant relationship between FDI inflows and monetary union to the African continent during the study period. In fact, there were bi-directional relationships between FDI inflows and some of the determinants in both continents. Theoretically, this model provides predictive implications on improved FDI inflows, given the activities of critical variables manifesting as determinants of FDI inflows.

Background: Macro-locational determinants of foreign direct investment (FDI) constitute a country’s comparative advantage in attracting FDI. Although literature identifies potential determinants of Chinese FDI, empirical studies reveal significant variation across countries, necessitating investigation of specific macro-locational factors in each context.Aim: Despite its abundant resources and reliance on FDI for development, Cameroon has experienced slow FDI growth. Efforts to enhance trade and investment relations between Cameroon and China make an understanding of Chinese FDI drivers crucial for policymakers. This study aims to ascertain the significance of macro-locational determinants in attracting Chinese FDI to Cameroon.Setting: The study uses quarterly data on proposed macro-locational determinants of FDI from 2003 to 2017.Method: Data were obtained from credible databases and reports. The study employs time series data and uses the Johansen approach and vector error correction modelling for analysis.Results: Findings indicate a statistically significant positive relationship between Chinese FDI and Cameroon’s market size and competitiveness. A significant inverse relationship was found between exchange and interest rates and Chinese FDI. Trade openness had a small but ambiguous effect on Chinese FDI.Conclusion: The results align with FDI theories though not all proposed determinants were significant for Chinese FDI in Cameroon. To attract FDI, Cameroon must expand its market, stabilise exchange rates and maintain competitiveness, especially through skills development. Financial institutions should provide competitive interest rates to promote private-sector borrowing.Contribution: This study enhances the understanding of the key factors influencing Chinese FDI in Cameroon and contributes to the limited research on macro-locational determinants of FDI in Africa.

Foreign Direct Investment (FDI) in recent years has created a positive impact for ASEAN countries. FDI give spillover effects that directly contribute capital improvements, technological developments, and global market access, also skills and managerial transfers. In order to attract FDI inflow into country, ASEAN member countries need to know what factors which attract investment related to the needs of infrastructure types and other factors. The purpose of this study is examine the determinant of FDI in ASEAN countries. This research method used is panel data regression period 2005-2015 from 10 countries in ASEAN. The results showed simultaneously and partially telecommunication infrastructure, market size, trade openness, and labor force variable have significant relationship with FDI inflows in ASEAN countries.Keywords: panel data regression, telecommunication infrastructure, market size, trade openness, labor force, FDI.ReferencesAppleyard, DR. Field, JF. and Cobb, SL. 2008. 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The present study examines the foreign direct investment (FDI) determinants in the main manufacturing sectors and the impact of FDI on economic growth in Malaysia. Moreover, this study examines the link between FDI and real national income. The vector error correction model (VECM) is used to estimate FDI determinants and the link between FDI and real national income.Foreign direct investment (FDI) is a vital driver for economic growth in a country. Hence, FDI determinants should be identified in order to promote FDI. FDI could stimulate economic growth and economic growth could attract FDI. A variety of policies shall be implemented to promote FDI as FDI determinants are not the same for all subsectors of the manufacturing sector in Malaysia. Promoting FDI can be more challenging in globalisation of the world economy today than before. The government shall promote FDI that encourages the growth of the domestic industry. Many manufacturing sectors are found to be significantly influenced by autocracy and polity. It has been discovered that inflation has a negative impact on FDI in the transport equipment sector. It is discovered that the Asian financial crisis of 1997–1998 had a significant impact on FDI in the chemical and chemical products sector as well as the petroleum products sector. These findings reveal that FDI determinants are not exactly the same for all the manufacturing sectors. Therefore, FDI would be attracted through a variety of policies. The sectors of basic metal products, chemicals, and chemical products are found to be Granger causes of real national income, whereas the sector of petroleum products is found to be Granger cause of FDI. These findings show a connection between FDI and economic expansion. Malaysia's economy can continue to grow thanks to FDI. FDI is essential for economic expansion.

This research paper investigated the determinants of foreign direct investment inflow into the Nigerian economy. This is because Nigeria at present is still characterized by low economic growth, which has created other macro-economic problems like inflation, low export, unemployment, unfavorable exchange rate, balance of payment disequilibrium, etc. The study adopted the Autoregressive Distributed Lag (ARDL/Bounds testing) econometric tool to examine the determinants of foreign direct investment (FDI) in the Nigerian economy. Data for the analysis are annual data covering the period 1981-2019, obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin several issues. The study used inflation rate (INFR), interest rate (INTR), exchange rate (EXR) and trade openness (TOPN) as independent variables. While foreign Direct Investment (FDI) was used as the dependent variable. The result indicates that exchange rate (EXR) and trade openness (TOPN) are all positive determinants of FDI in the Nigerian economy as their corresponding coefficients are positive. The result further shows that for the Nigerian economy to attract FDI significantly by one percent, exchange rate and trade openness will increase by 0.18 and 5.00 percent respectively. On the other hand, inflation rate (INFR), and interest rate (INTR) are negative determinants of foreign direct investment in Nigeria. Meaning that, an attempt to increase either of these variables would result to a decline in foreign direct investment in the country and vice versa. We therefore conclude that both EXR and TOPN had a positive and significant impact on the FDI inflow to the Nigerian economy, and are therefore adjudged positive determinants of FDI inflow into the Nigerian economy within the period 1981-2019. INFR and INTR on the other hand maintained their negative influence on FDI inflow to the Nigerian Economy, hence, are negative determinants of FDI inflow into the Nigerian economy within the period 1981-2019. Finally, we recommend that government should sustain its drive for import substitutions which will encourage export, expand its bilateral trade ties with developed economies so as to woo FDI inflows. Also, government through it monetary authorities should reduce inflation and interest rates. This will help to woo FDI inflow into the Nigerian economy.

Purpose This empirical analysis tries to examine determinants of private foreign direct investment (FDI) in Pakistan using the bounds test approach. Main determinants of FDI among them are the size of the market (Q) macroeconomic stability (r), political stability (PRS), real exchange rate (REX) and institutional quality (INQ). Design/methodology/approach This study used annual time-series data set starting from 1980 to 2016. This study has used time-series data with ARDL and error-correction model (ECM) and examined main determinants of FDI for Pakistan. The study used the Granger causality test (modified WALD test) to identify the causality among the variables. Findings Moreover, empirical findings indicate the long-run relationship between GDP, trade openness and institutional quality toward FDI. However, political instability, inflation and real exchange rate harm FDI in Pakistan. Furthermore, results of Granger causality indicate that the bidirectional causality running from FDI and Q toward FDI is significant, providing evidence of FDI-led growth hypotheses in Pakistan. This study determines the correlation between FDI and Q (GDP growth) related to the “feedback hypothesis” in the short and long run. This study also concludes that the short-run causal connection among FDI, REX, PRS, r and Q follows the “feedback hypothesis.” This describes that FDI, REX, PRS, r and Q variables are jointly determined and affected together. Originality/value This study also explores the causal association between FDI and its significant determinants, by using methods of Granger causality test and the approach of Toda-Yamamoto-DoladoLutkephol (TYDL) to examine the causal relationship and its directions among these variables.

In its drive to achieve a high-income country status, Malaysia aspires to attract more private investment into the services sector. However, empirical studies on the determinants of foreign direct investment (FDI), especially in the services sector, are sparse, even more so at the industry level. The location theory asserts that FDI inflows into a host country are determined by variables related to resources, infrastructure, market conditions, cost and business environment. This paper investigates the validity of the location theory on Malaysia using a set of panel data for eight services industries from 2003 to 2010. We find that at the industry level, market size, ICT infrastructure and human capital have significantly influenced FDI inflows into the services sector. However, the impact of FDI liberalisation is not significant compared to the dynamic changes of the other variables as progress in FDI liberalization is slow and limited.