Environment For Foreign Direct Investment Research Articles

The Effects of Exchange Rates Volatility and Inflation on Tanzania’s Trade Balance: Evidence from J-Curve Effect

All economies today are experiencing the volatility of exchange rates and inflation in global markets. Consequently, this affects the trade performance among trading partners globally. This study examines the effects of exchange rate volatility and inflation on Tanzania’s trade balance. Time series data spanning 1990 to 2020 were used from the World Bank and Bank of Tanzania (BOT). Moreover, J-Curve and Marshall Lerner's theories provided the theoretical arguments. Systematically, a Vector Error Correction Model (VECM) was employed for short- and long-run analysis. The findings reveal that, in the long run, inflation, Foreign Direct Investment, and Gross Domestic Product have a positive impact on the trade balance, while the Exchange Rate exerts a negative influence. In the short run, the exchange rate negatively affects Foreign Direct Investment, while Gross Domestic Product has a positive influence. Further, the gross domestic product also positively influences inflation. Furthermore, the exchange rate and gross domestic product significantly affect the trade balance negatively and positively respectively. Analysis of impulse response functions confirms the presence of the J-Curve effect, showing an initial deterioration in the trade balance following a depreciation of the domestic currency, which reverses after three periods. These findings suggest the need for effective exchange rate management, promotion of export competitiveness, and a good environment for foreign direct investment to enhance trade performance in Tanzania

FDI IN INDIA: AN ANALYSIS OF LEGAL FRAMEWORKS AND INVESTOR PROTECTIONS

This paper provides a comprehensive analysis of Foreign Direct Investment (FDI) in India, focusing on the multifaceted legal frameworks and investor protection mechanisms that characterize the Indian investment landscape. As one of the world's fastest-growing economies, India presents significant opportunities for foreign investors seeking to tap into its vast market potential. However, the journey is not without challenges, including regulatory complexities, infrastructural inadequacies, and cultural differences that can impede investment processes. This study delves into various government initiatives aimed at fostering a conducive environment for FDI, including reforms that simplify regulations and promote transparency. Additionally, it examines the mechanisms in place to protect investors, such as the role of the Securities and Exchange Board of India (SEBI) and the establishment of grievance redressal systems. The findings underscore the importance of understanding both the opportunities and challenges inherent in the FDI landscape, offering valuable insights for potential investors and policymakers striving to enhance the investment climate in India.

The Impact of Trade Liberalization on FDI Inflows and Economic Development

This paper investigates the impact of trade liberalization on foreign direct investment (FDI) inflows and economic development in the Czech Republic. Utilizing a mixed-methods approach, the study combines quantitative econometric analysis with qualitative case studies and interviews. The empirical results demonstrate a significant positive correlation between trade openness and FDI inflows, indicating that a 1% increase in trade openness is associated with a 0.5% increase in FDI inflows. Furthermore, the structural equation modeling (SEM) results reveal that a 1% increase in FDI inflows is associated with a 0.3% increase in GDP growth and a 0.2% increase in employment rates. These findings underscore the critical role of an open trade environment in attracting foreign investment and fostering economic development. The study also highlights the importance of other factors such as institutional quality, political stability, and infrastructure development in creating a conducive environment for FDI. Policy implications suggest that maintaining open trade policies, improving institutional frameworks, and investing in infrastructure and innovation are essential strategies for achieving long-term economic development in the Czech Republic and similar transition economies.

Effect of Oil Price Shocks on Selected Macroeconomic Variables in Nigeria (1990-2021)

This study investigates the impact of oil price shocks on selected macroeconomic variables in Nigeria from 1990-2021. The research employs ex-post facto methodology and econometric analysis, focusing on variables such as oil price, unemployment, balance of payment, exchange rate, and real gross domestic product (GDP). Utilising the annual Vector Autoregressive (VAR) model, the study explores the relationships among these variables, assuming them to be endogenous. Time series data from the Central Bank of Nigeria's statistical bulletin is collected for the analysis. The result of the unit root test indicate that all the variables are integrated of order one (I (1)), necessitating further investigation into their relationships. Impulse response function revealed the dynamic responses of macroeconomic variables to oil price shocks over a ten-year period. Granger causality test highlight causal relationship among the variables, emphasizing the influence of oil price shocks on unemployment, balance of payment, and real GDP. The findings suggest that oil price shocks significantly affect the selected macroeconomic variables, with implications for exchange rates, unemployment rates, and balance of payments. The study recommends policy measures to insulate the economy from international oil price shocks, such as diversification, encouraging local production, and creating a favourable environment for foreign direct investment. Additionally, the government is advised to formulate and implement fiscal and monetary policies strategically to stabilise the economy amidst oil price fluctuations, thereby promoting sustainable economic growth.

The Role of FDI in India's Manufacturing Sector: Growth, Challenges, and Opportunities

This research paper explores the pivotal role of Foreign Direct Investment (FDI) in the growth and transformation of India's manufacturing sector, with a focus on recent trends, challenges, and future opportunities. It highlights the positive impact of FDI facilitated by government policies, including the "Make in India" initiative, which aims to boost the country's manufacturing capabilities and position it as a global hub. The study underscores the significant contributions of FDI to enhancing production capacity, technological advancements, and job creation. However, it also identifies key challenges, such as regulatory hurdles and inadequate infrastructure, that continue to limit the sector's full potential. In the context of recent global economic shifts, including the impacts of the COVID-19 pandemic and evolving trade policies, the paper examines how these factors influence FDI inflows and the strategic positioning of India's manufacturing industry. According to recent data from the Reserve Bank of India, FDI inflows into the manufacturing sector increased by 15% in the fiscal year 2021-2022, reflecting the sector's resilience and continued attractiveness.1 The paper concludes with recommendations for policy reforms aimed at creating a more conducive environment for FDI, essential for the sustained growth and competitiveness of India's manufacturing sector.

Causality between Financial Development and Foreign Direct Investment: Evidence from Tanzania

This study investigates the causal relationship between Foreign Direct Investment (FDI) and Financial Development during the period 1990-2020 in Tanzania. The study aims to shed light on whether FDI inflows have a significant impact on the financial development of the country and vice versa. The analysis employs time series data including GDP, Inflation rate, Formation (capital and Investment), Trade Openness, Country Population size, and Financial Development, to explore the causal links. Using the Granger causality test, the study finds no evidence of causality between FDI and Financial Development, indicating that FDI inflows do not significantly predict changes in financial development, and vice versa. Similarly, the study does not find significant causality between FDI and other control variables such as GDP, Inflation, Formation, and Country Population size. However, there is a significant bi-directional relationship between FDI and Trade Openness, indicating complementarity between FDI and international trade. The results imply that FDI inflows might not be the sole determinant of financial development or other macroeconomic indicators. Policymakers should not solely rely on FDI as a solution to enhance financial development but should focus on creating a conducive environment for FDI and supporting measures that foster financial development independently. The study recommends that policymakers should prioritize strengthening institutions and regulatory frameworks to attract and retain FDI effectively. They should also promote trade liberalization and enhance the domestic financial system to stimulate both FDI inflows and domestic investment.

Analyzing the Influence of Exchange Rate Dynamics on Foreign Direct Investment in Pakistan: A 13-Year Analysis

Background: In the economic development of Pakistan, Foreign Direct Investment (FDI) plays a crucial role while the exchange rate has been determined as an important factor influencing the FDI inflows. Research Aim: This research paper explores the multifaceted relationship between changes in exchange rate and Foreign Direct Investment (FDI) in Pakistan aiming to shed the light on complex dynamics at play. Methodology: Through the data analysis from 2010 to 2022 and empirical studies this study identifies a significant relationship between the change in exchange rate and FDI. The test of Linear Regression and Pearson’s Correlation were applied to test the data through SPSS software. Results: The results of the correlation exhibited that there is a positive relationship between change in Exchange rate and FDI, while the R-square in the regression analysis showed about 58.1% impact of the independent variable on the dependent variable. It is apparent from the study that the depreciation and appreciation of the Pakistani currency relative to major international currencies affects the decision of the investors. Conclusion: This paper concludes with a set of recommendations for the Government of Pakistan with the aim of creating a conducive environment for Foreign Direct Investment (FDI) by considering stabilizing the exchange rate as a key factor. Further, this research will help provide valuable insight and pathways for the policymakers and investors in forming the decision-making and policy for the development and sustainable growth of the economy of Pakistan.

The determinants of inward FDI in India in the 2000s

Purpose Unlike the traditional growth model of emerging markets after economic liberalization, India’s inward foreign direct investment (FDI) surged paralleling its strong economic growth in the 2000s, despite the failure to establish a strong secondary sector. This creates an opportunity to deepen the conceptual and contextual understanding of the pivotal mechanisms that impel foreign multinational enterprises to invest into India and provides a natural setting to better understand the nature of its institutional, political and economic environment. Design/methodology/approach The authors develop a theory contextualized to Indian inward FDI patterns for the 2000–2017 period. The theoretical framework expands upon received investment motives, with explicit consideration given to the idiosyncrasies of developments in India’s recent macro and socioeconomic environment. The authors test the hypotheses using panel data from 134 countries that invested in India, using a Hausman–Taylor estimation. Findings The authors find that India’s transition toward a knowledge economy attracts asset augmenting rather than asset exploiting FDI. Investors appear to target long-term investments by gaining access to India’s digital capabilities, R&D, and growing talent base with a high degree of specialization within analytics, biotechnology, engineering, or pharmaceuticals. Foreign investors do not seem to be notably deterred by infrastructural challenges nor by legal and regulatory restrictions. Originality/value By providing a new perspective on India’s atheoretical economic development and FDI environment, this study offers a distinct point of comparison with regard to established hypotheses within the extant literature on FDI into emerging markets. Rethinking contemporary investment motive theory by introducing an adapted conceptual framework provides further opportunity to inform the understanding of firm strategies in similar environments.

The Environmental Cost of Attracting FDI: An Empirical Investigation in Brazil

Many emerging economies seek to increase their Foreign Direct Investment (FDI) inflows to achieve some promised benefits, such as economic growth and advanced technologies. Nevertheless, FDI does not represent a random investment decision, and international literature demonstrates that foreign investors are mostly interested in fast-growing regions. Therefore, this study uses traditional panel data econometrics coupled with Data Envelopment Analysis (DEA) to investigate the environmental impact in regions with great potential to attract foreign investments (e.g., more advanced regions with growing infrastructure), therefore analyzing the environmental cost of attracting FDI. Additionally, this study employs regional data from the ‘Atlas of FDI in the State of São Paulo’ to investigate the environmental effects of FDI in the periphery, where attractiveness levels are low. The results indicate that regions with higher attractiveness levels prepare a pollutant development strategy and that FDI in less-developed regions is harmful to the environment. The results point to new perspectives on the FDI–environment debate and suggest that attracting FDI is environmentally costly. Also, FDI is heterogeneous, with its presence in peripheral areas being harmful to the environment. To conclude, we discuss these results and present an agenda for future research.

The Impact of FDI on Urban PM2.5 Pollution in China: The Mediating Effect of Industrial Structure Transformation

With the rapid growth of foreign direct investment (FDI), PM2.5 pollution in Chinese cities is increasing. Based on panel data for 271 Chinese cities from 2003 to 2016, this paper uses the dynamic spatial fixed-effects Durbin model to analyze the correlation between FDI and PM2.5 pollution and the effect of FDI on urban PM2.5 concentrations, as mediated by industrial structure transformation, which is clarified using Stata/SE 16.0. The results showed that PM2.5 pollution in China has significant spatial spillover effects, and the pollution haven hypothesis is applicable to Chinese cities. The industrial structure partially mediates the relationship between FDI and PM2.5. This paper proposes that local governments should promote the market-oriented reform of FDI to create a more convenient, legalized, and international environment for FDI and innovate the governance philosophy of only reducing the existing emissions. A top-level design and sound market supervision system of PM2.5 control are also needed.

Corruption and FDI inflow to Nigeria: a nonlinear ARDL approach

PurposeThis paper aims to empirically explore the asymmetric relationship between corruption control and foreign direct investment (FDI) in Nigeria.Design/methodology/approachThe study utilized the non-linear autoregressive distributed lag (NARDL) bounds test technique for the time-series analysis covering the period 1984-2017.FindingsThe findings reveal that corruption inhibits FDI inflow and corruption control has asymmetric effects on FDI inflow to Nigeria. The coefficient of positive shock or changes in respect of corruption control is positive as well as statistically significant during the long run, while the coefficient of negative shock is negative, but statistically insignificant. This implies that improvement in corruption control encourages inflow of FDI to the country, whereas a decrease in corruption control has an insignificant effect.Practical implicationsNigeria needs to intensify its corruption control efforts to effectively enhance the conduciveness as well as attractiveness of its business operating environment for FDI inflow.Originality/valueThis paper is among the first to use time-series analytical process to empirically verify the asymmetric association of corruption control and FDI inflow in Nigeria. In this regard, the insight generated by outcomes of the study will enable specific inferences to be drawn from the empirical findings by policy makers, academic researchers and business practitioners.

Foreign Direct Investment, Management and Their Role in Economic Development - Kosovo Case

One of the important aspects of a country's economic development is Foreign Direct Investment (FDI), these investments impact on economic development and improve social aspects. At the international level as well as at the country level, FDI has a relevant significance which as an issue is related to the sustainable management policy that makes the country more attractive in absorbing FDI. The purpose of this paper is to present the trends of FDI in the Western Balkan countries with an open look in Kosovo and their comparison, investment policy management, GDP FDI correlation and comparison of the trends of the remittances .Firstly in the introduction of this paper there is a theoretical review of the literature on the definitions of FDI in the economic aspect. Secondly, FDI has been presented and compared over the years in the Western Balkans countries with a vacant look in Kosovo. Third, it analyzes the FDI trends in Kosovo based on the country of origin of these investments, etc. Fourth, in the framework of this research paper, country-level management policies were analyzed in terms of creating an incentive environment for FDI. Fifth, as part of this paperwork, there are also empirical analysis of the correlations between FDI and GDP in the case of Kosovo, etc.
 
 Keywords:
 One of the important aspects of a country's economic development is Foreign Direct Investment (FDI), these investments impact on economic development and improve social aspects. At the international level as well as at the country level, FDI has a relevant significance which as an issue is related to the sustainable management policy that makes the country more attractive in absorbing FDI. The purpose of this paper is to present the trends of FDI in the Western Balkan countries with an open look in Kosovo and their comparison, investment policy management, GDP FDI correlation and comparison of the trends of the remittances .Firstly in the introduction of this paper there is a theoretical review of the literature on the definitions of FDI in the economic aspect. Secondly, FDI has been presented and compared over the years in the Western Balkans countries with a vacant look in Kosovo. Third, it analyzes the FDI trends in Kosovo based on the country of origin of these investments, etc. Fourth, in the framework of this research paper, country-level management policies were analyzed in terms of creating an incentive environment for FDI. Fifth, as part of this paperwork, there are also empirical analysis of the correlations between FDI and GDP in the case of Kosovo, etc.
 
 Keywords: Foreign Direct Investment, Investment Policy Management, Correlations, Remittances
 
 JEL classification: F21, M12, C33, F24
 
 JEL classification: F21, M12, C33, F24

A Study on the Port Competitiveness of Korea-China Car-Ferry Routes: Focused on the Ports of the Yellow Sea

Purpose - This research aims to analyze the competitiveness of the ports where the Car-Ferry routes are operated between Korea-China. Design/methodology/approach - This research is exercised on the West coast ports such as Incheon, Pyeongtaek and Gunsan in Korea and Shandong provinces as Qingdao, Yantai and Weihai in China using Entropy weighted factors and the quantitative SWOT through distinguishing the internal factor and external factor. Findings - The result showed that handled automation and information ranked the most important factor in the internal factors and the amount of Foreign Direct Investment was the most important factor in the external factors. Research implications or Originality - According to positioning competitiveness of each port, Qingdao port was the greatest competitive port comparing with other ports in the Yellow sea, and Incheon port and Yantai port were followed it. In order to enhance the competitiveness of ports, they should invest technology through Radio-Frequency Identification, Artificial Intelligence and Internet of Things for port service level. Furthermore, for the socio-economic stability, they have to make an effort to create the environment for Foreign Direct Investment and cargo marketing. This study can contribute the information to the decision makers to strengthen the competitiveness of ports.

Foreign direct investment inflows, intellectual property rights and economic freedom: Empirical evidence from middle- and low-income countries

This study examines the impact of intellectual property rights (IPRs) on foreign direct investment (FDI) inflows, using macro data over a panel of 39 middle- and low-income countries as classified by the World Bank. Empirical assessment was made in order to provide a clear and data-based explanation for this controversial issue. The analysis of the IPR/FDI nexus was carried out over the period 1990–2009 using GLS fixed effect (FE) and the two stages least square (IV2SLS) panel data estimation. Our empirical results show that the IPR has no statistically significant impact on FDI inflows in the sampled group, even when controlled for endogeneity. They also demonstrate that the FDI toward the developing countries is not affected by their institutional IPR's reforms. However, other variables, such as the economic freedom index, the market size and the level of human capital, are crucial in explaining foreign investments. These results are of particular interests to policymakers as they help identify the main factors contributing to the creation of an attractive and sound environment for FDI that can ensure sustainable economic growth.

Foreign Direct Investment (FDI) Environments of the 21 Provinces of Mongolia and Implications for FDI in the Provinces

Lately, foreign investors have become interested in making direct investment in the Mongolian provinces. One thing that is becoming important given that foreign investors have become interested in making direct investment in the Mongolian provinces in this manner is a study on examining FDI environment of the Mongolian provinces and deriving implications for FDI in the Mongolian provinces based on it. The reason is that, first, this type of study could be significant for foreign investors’ selection of a province to make a direct investment among the Mongolian provinces and second, for that foreign investors develop a way and strategy to make a direct investment in the Mongolian provinces. Furthermore, this type of study could be significant in helping direct investment of foreign investors in the Mongolian provinces be conducted rationally and effectively, through, for instance, the above two ways. To the best of the author‘s knowledge, there has been no study on FDI environments of the 21 provinces of Mongolia and implications related to making direct investment therein. However, considering foreign investors’ growing interest in direct investments in the Mongolian provinces and significance of study on the FDI environment of the Mongolian provinces and implications for FDI based on it, it seems that this type of study is essential. Accordingly, the study aims at examining FDI environments of the 21 provinces of Mongolia and developing implications related to that foreign investors make a direct investment in the Mongolian provinces based on it. In line with this aim, the study, first, developed a theoretical framework to examine FDI environments of the 21 provinces of Mongolia from the perspective of main types of FDI such as market-seeking, resources-seeking, and efficiency-seeking FDI. Thus, it examined FDI environments of the 21 provinces of Mongolia by applying the theoretical framework and derived implications related to foreign investors making FDI in the Mongolian provinces based thereon. The study yielded the following results. First, it found that the 21 provinces of Mongolia have different and distinct environment by each FDI type (market-seeking, resources-seeking, and efficiency-seeking FDI). In addition, it found that there are provinces that have a favorable environment and provinces that have a semi-favorable environment by each FDI type. Second, it derived and suggested five implications related to foreign investors making FDI in the Mongolian provinces based on the FDI environments of the 21 provinces of Mongolia. Finally, the study reached a conclusion that foreign investors are able to make FDI in the Mongolian provinces in several ways related to the FDI environments of the 21 provinces of Mongolia.

The Impact Of Some Variables Of The Economic Investment Environment On Foreign Direct Investment In The Kurdistan Region Of Iraq For The Period 2006-2016

Foreign direct investment (FDI) is one of the most important sources of external financing at the present time, which provides capital for the development process, an instrument for introducing modern technologies and technical and administrative expertise to the Kurdistan region of Iraq, increasing manpower skills, introducing modern methods of production, , Increasing their competitiveness. The objective of the research is to identify the specific investment environment of foreign direct investment and to measure the impact of economic investment environment indicators on foreign direct investment in the Kurdistan region of Iraq using the Autoregressive Distributed Lag Model (ARDL) model. The study found that there is a long-term equilibrium relationship between the independent variables (GDP, GDP per capita) and the dependent variable (FDI) during the study period. There is a long-term adverse and significant effect between the interest rate and foreign direct investment. The results also showed that there was no long-term impact relationship between (official exchange rate, inflation rate) and foreign direct investment (FDI). The study recommended the issuance of more legislation and procedures that encourage the creation of an attractive investment environment for foreign direct investment by improving political and security conditions, macroeconomic indicators and infrastructure development, and streamlining administrative procedures in ministries, bodies and institutions related to foreign investment. The concept of e-government refers to the development of the banking system because of its role in the financing of investment projects, and the development of programs and policies promotion of investment opportunities available in the Kurdistan region of Iraq. .

Does Host Country Institutional Quality Act as a Differentiator in Intra-regional FDI? Evidence from Selected Asian Economies

With primary considerations such as trade and investment openness becoming similar for many economies due to globalization, the role of other factors such as institutional environment in promoting investment has captured increasing attention in recent times. In view of the growing importance of Asia as a prospective foreign direct investment (FDI) destination, we employ panel data regression data for 16 Asian economies over the period 2000–2012 to study if institutional quality affects FDI flows and stocks and whether it can act as a differentiator while selecting a location within Asia. Among the institutional variables employed, ‘political stability and absence of violence/terrorism’ were found to be significant determinants revealing the importance of a stable and safe political environment for FDI. However, ‘corruption’ and ‘regulatory inefficiency’ were found to affect FDI inflows positively, indicating the preference of foreign investors for a system where laws can be circumvented easily through corrupt bureaucracy and where regulations are weak or less stringent. JEL: F21, F23, O43, O53

A new era for foreign direct investment?

PurposeThe paper aims to provide an updated broad assessment of the environment for foreign direct investment (FDI) in light of the referendum vote in the UK to exit the European Union (Brexit), the election of Donald Trump as President of the USA and growing nationalist movements in Europe.Design/methodology/approachThe paper uses an essay format to set out the main issues linking recent political developments to FDI. It reviews some relevant empirical literature to assess the identified linkages.FindingsIt seems reasonable to argue that there will be a reduction in FDI intensity on a global basis over the foreseeable future. It is also likely that the nature of FDI will move more toward being a substitute rather than a complement to trade.Originality/valueThe essay is original and valuable in the sense of offering a contemporary assessment of how important the recent political events may affect the FDI process.

Foreign Direct Investment Regulation, Business Taxes, and Corruption: Cross-Country Study of Foreign Bank Presence

In this study, I investigate the impact of legal determinants on the presence of foreign banks. Using a panel dataset of 44 countries for the 2005–2012 period, I find that host countries attract more foreign banks when regulatory restrictions on foreign direct investment are low, when the compliance cost for paying taxes is low, and when host-country governments are less corrupt. I apply a robustness check to confirm the results. Overall, the evidence highlights the importance of government efforts to create a more favorable foreign direct investment environment by reducing restrictions and, along with those, costs associated with foreign capital investments.

The Impact of Health Expenditure on the Economic Growth in Sub-Saharan Africa

This paper examined the nexus between health care expenditure and economic growth in Sub-Saharan Africa over the period 1995-2014. We use the system General Method of Moments (GMM) technique to estimate the results. The findings reveal the existence of a positive and a statistically significant relationship between the two variables, precisely; health expenditure has a significant impact on the economic growth of the region. Regarding the control variables, while the effect of official development assistance on economic growth is insignificant, foreign direct investment, the active population and gross domestic savings appear as key determinants of economic growth in the region. Additionally, the results show that health care is a necessity rather than a luxury in Sub-Saharan Africa. It is therefore necessary to develop effective and efficient health care programs, increase health expenditure, make an effective use of the young population and create better environment for foreign direct investment in order to foster economic growth in Sub-Saharan Africa.