FDI Inflows Research Articles

Corporate Taxation and Subsidy Distortions as Barriers to Private Domestic Investment in Serbia

This paper examines the structural barriers to private domestic investments in Serbia, with a particular focus on the role of corporate taxation and subsidy policy. The analysis combines descriptive empirical data, comparative legal assessment, and institutional diagnostics to explore why domestic investments have remained persistently low relative to both foreign direct investments and levels observed in comparable EU economies. Using Eurostat and World Bank data for the period 2013–2022, the paper documents that total investment growth in Serbia has been primarily driven by rising FDI inflows and increased public investments, while domestic private investments have remained weak. Despite a relatively high fiscal effort devoted to investment incentives, including both tax-based instruments and direct subsidies, the design and allocation of these measures appear to disproportionately benefit large investors – most often foreign. The paper contextualises Serbia’s statutory and effective corporate tax rates within EU norms and identifies significant structural asymmetries in incentive accessibility between firms of different sizes. It also develops a classification of corporate tax incentive regimes in selected EU member states and Serbia, based on the structure and conditions of tax-based investment support, which is used to assess Serbia’s position relative to prevailing EU practices in the design of fiscal incentives. Institutional barriers, including legal uncertainty and administrative inefficiency, further constrain domestic investments. The findings suggest that Serbia’s current investment model is unlikely to support sustainable long-term development unless policy is rebalanced to improve the investment climate for domestic firms. The findings inform policy recommendations aimed at rebalancing incentive structures and strengthening institutional and financial conditions for domestic investments.

DOES INSTITUTIONAL QUALITY IMPACT ON FOREIGN DIRECT INVESTMENT OF ECONOMIC GROWTH IN INDIA- USING STRUCTURAL EQUATION MODELING.

Purpose: This empirical investigation based on the current stage of economic development indicates that FDI has important impact on the country of destination's stable, high-quality and healthy economic growth. Any nation that is involved in the process of economic globalization is therefore trying to develop a competitive business environment in the country to draw further foreign investments. Design/Methodology/Approach: the main objective of this study is based on Institutional quality or Evidence and I selected 5 factors Institutional Metrics like Control of Corruption, Government Effectiveness, Political Stability, Regulatory Quality, Rule of Law from DPIIT website (Secondary Data) for the period 2018-2023. We are Using stalactitical tools like Unit root Test, ARDL Approach & SEM. Originality/Value: This study applies Least Squares regression (OLS): The study examined the impact of institutional factors influence on the FDI flows. The study has considered the ordinary least square method to know the impact of institutional factors (independent variables) on FDI flows (dependent variable). Findings: The study found with the help of ARDL model that the Institutional indicators had are having the positive coefficient value and stated that Institutional Metrics of corruption and Govt. effectiveness are institution indicators which shown short run association with FDI flows, The study examined that Political stability f-statistic value is falling above the upper peasant table (i.e., 7.4578 > 4.16) which states political stability has a long run association with FDI flows, Institutional Indicators such as Rule of law, Regulatory Quality and Voice & accountability had a long run association with FDI flows. Keywords: FDI, Institutional Metrics, Economy Growth, SEM Model.

Impacts of Brexit on corporate productivity in the UK: a regionalism perspective

The nexus of Brexit-related uncertainty and corporate productivity in the UK has garnered sufficient attention while a regionalism perspective has also become important given the regional heterogeneity existing in this nexus. This paper documents spatiotemporal growth paths of corporate total factor productivity (TFP) in Wales, a typical UK country, during the period 2013–2019 divided by the 2016 Brexit Referendum. Using firm-level panel data, pooled OLS, fixed effect, and IV analysis, the author demonstrates that corporate TFP growth for firms in Wales was significantly weakened by Brexit-related uncertainty. Firms in South Wales and those with stronger EU-oriented characteristics are more adversely affected by Brexit. The author also conducts mechanism tests and finds that Brexit discourages corporate TFP through channels of establishing additional barriers to trade, FDI inflow, and international inward migration in Wales. PSM-DID analysis is then applied for comparative studies on firms in Wales and Brittany in France, two economically similar regions in Europe, with results similar to benchmark analysis outcomes.

Eradicating Poverty in Developing Countries: The Role of Technological Innovation, Foreign Direct Investment and Institutional Quality

This study analyzes the effect of technological innovation, institutional quality, and foreign direct investment on poverty eradication in developing countries using the data from 53 developing countries from 2002 to 2021. Different econometric techniques are used for data estimation including cross-sectional dependence test, slope homogeneity test, CIPS and CADF tests of unit root, panel cointegration test, FGLS model for parameter estimations, PCSE model for robustness estimation and Granger causality test. The findings show that FDI, institutional quality, technological innovation and education are negatively and significantly related to the poverty headcount ratio in developing countries, whereas income inequality is found to be positively and significantly linked to the poverty headcount ratio in developing countries. Lastly, the panel Granger causality test indicates a one-way causality between FDI and PHC, and TI and PHC. In addition, bidirectional causality is found between IQ and PHC. Lastly, no causality is observed between GINI and PHC, as well as between EDU and PHC, in developing countries. Therefore, it is concluded that FDI inflows, IQ and TI are imperative to reduce poverty in developing countries.

FOREIGN DIRECT INVESTMENT IN INDIA: A STUDY

Foreign Direct Investment serves as the foundation for the economic progress of many nations. It involves foreign capital bridging the gap between domestic savings and investment, contributing to the convergence of diverse economic aspects within a country. Through FDI, capital is invested across sectors such as service, manufacturing, transport, technology, productivity, and hospitality, playing a crucial role in India's economic development. Various factors, including economic stability, regulatory environment, sectoral policies, political stability, and infrastructure, influence FDI. Despite both merits and demerits, Indian FDI is noteworthy. This study primarily focuses on analyzing the trends and patterns of FDI inflow into India, aiming to provide an overview of FDI in India. The study also concentrates on identifying the determinants of FDI and understanding the necessity for FDI in India, incorporating sector-wise and year- wise analyses of FDI in the country. Keywords: FDI, RBI, GDP, SEBI, IRDA, FEMA

Macroeconomic Indicators of Selected Developed Nations and Its Influence on Indian Economy

This study examines how macroeconomic indicators from the United States and Japan influence the Indian economy, emphasizing global financial interconnections. It focuses on key variables such as GDP growth, interest rates, inflation, and exchange rates, analyzing their effects on India’s FDI inflows, currency fluctuations, inflation, and monetary policy. The study finds a strong positive correlation between US interest rates and India’s FDI inflows, highlighting India’s attractiveness as an investment destination despite rising US rates, driven by structural reforms and economic growth. In contrast, Japan’s interest rate changes show a weak negative correlation with India’s FDI, indicating minimal impact due to Japan’s policy-driven investments. US GDP growth strengthens the Indian rupee, while Japan’s GDP growth contributes to rupee depreciation, likely due to trade imbalances and capital flows. US inflation significantly affects India’s inflation and monetary policy through capital movements and currency depreciation, while Japan’s inflation mainly impacts import-dependent sectors. Using a quantitative research design, the study employs regression analysis, correlation analysis, and the Augmented Dickey-Fuller Test (ADFT) on secondary data, offering insights for policymakers to mitigate external economic shocks.

How do effective taxation and institutions affect FDI nowadays?

We explore the effects of effective taxation and institutional quality on sectoral FDI. Our analysis includes European countries, using data from 2002 to 2020. Employing a GMM approach, we show that an increase in effective taxation reduces sectoral FDI flow. Among the institutional variables, tertiary enrolment attracts FDI, while secondary attainment has varying effects depending on the sector. Our findings suggest that governments should lower taxes to encourage more FDI flows and strengthen tertiary and secondary enrolment.

The Determinants of FDI Inflows in the Indonesian Manufacturing Sector: Some Evidence from Spatial Dependency Measurements

The Determinants of FDI Inflows in the Indonesian Manufacturing Sector: Some Evidence from Spatial Dependency Measurements

IFRS Adoption and the Posthuman Economy: Financial Reforms, FDI, and Economic Growth in MENA Countries

The research aims to assess the impact of IFRS adoption on economic growth in MENA countries, and further, it aims to investigate the role of the mediating variable FDI in the relationship. The study sample consists of 22 countries in the Middle East and North Africa region during the period 2002-2022. The study reviews the empirical results of the variables of the study using the OLS, DOLS, FMOLS, GMM, and LSDVC. The findings of the study show that countries that have adopted or are gradually implementing IFRS are likely to have higher levels of GDP. The study also finds that there is a positive relationship between the adoption of IFRS and the increase in FDI inflows. This rise is an important factor in improving economic development. Hence, there is a positive relationship between the adoption of IFRS and economic growth, with other influential factors such as FDI. This study adds value to the literature regarding the effects IFRS on economic growth and the existence of factors that may enhance economic growth with the help of FDI in the relationship to assist governments in making their future decisions. The results of this study reveal that accounting should be taken into consideration to enhance economic growth through the adoption of IFRS as a way of creating a better environment for the attraction of FDI.

ASSESSING THE ROLE OF TECHNOLOGICAL INNOVATION IN THE RELATIONSHIP BETWEEN FDI AND ENVIRONMENTAL DEGRADATION

The present study explores the interactive role technological innovations with foreign direct investment in influencing environmental degradation, using panel dataset of Next eleven countries, ranging from 1990 to 2023. A series of econometric techniques are used to investigate the dynamics between FDI and environmental degradation. The study, in the outset tested the cross-sectional dependence among the countries to capture the potential interdependencies in their growth and investment trends, followed by slope heterogeneity test and then panel unit root test, all are conducted to ensure the reliability of the analyses. The Augmented Mean Group (AMG) technique is then applied to explore the possible interactive role of TI with FDI in influencing environment degradation. Moreover, to verify the robustness of our panel AMG estimation results, the CCEMG technique is used. Our results suggest that technological innovation play significant interactive role with FDI in alleviating the adverse outcomes of FDI on the environment. In particular, this factor helps reduce territory-based carbon emissions linked with FDI inflows, indicating a potential pathway for fostering sustainable development. This study contributes to the existing literature by highlighting the importance of integrating complementarity factors in policymaking, encouraging developing nations to capitalize this synergy to balance economic growth with environmental preservation. Policymakers can leverage this insight to design targeted strategies that effectively reduce environmental degradation.

Relative ESG positions among OECD countries in the presence of international competition for FDI inflow: A gravity model perspective

Relative ESG positions among OECD countries in the presence of international competition for FDI inflow: A gravity model perspective

Foreign Direct Investment and Financial Openness: A Fresh Evidence from Developing Economies

One of the critical challenges confronting developing nations is the attraction of foreign direct investment. This study examines the impact of financial openness on FDI inflows in developing countries using panel data spanning the period from 1993 to 2022, sourced from the World Development Indicators and the Worldwide Governance Indicators. The analysis employs the Generalized Method of Moments (GMM) to assess the relationship between FDI inflows (measured as net inflows as a percentage of GDP) and key economic and institutional factors, including financial openness, trade openness, GDP per capita, corruption levels, and political stability. The findings reveal that all these variables exhibit a significant and positive effect on FDI inflows at the aggregate level. Further regional analysis highlights variations across Asia and Africa. In Asia, while most variables positively influence FDI, financial openness and corruption exert a negative impact. Conversely, in Africa, all variables positively affect FDI except for corruption, which negatively influences investment due to the region’s persistent political instability. This study underscores the pivotal role of financial openness, political stability, and corruption levels in shaping FDI inflows. A stable political environment serves as a key determinant in attracting higher levels of foreign investment. Moreover, an increasing GDP per capita and an expanding domestic market enhance a country’s attractiveness to foreign investors. These insights provide valuable guidance for policymakers seeking to cultivate a favorable investment climate and promote sustainable economic growth.

The impact of green finance on low carbon economic development in the context of carbon neutrality: evidence from China

The global climate crisis has become the focus of attention, and China vigorously pursues low-carbon economic development, for which the implementation of green finance is continuously enhanced, so does the development of green finance contribute to low-carbon economic development? This paper constructs a green finance and low carbon economic development index system containing several indicators, and measures them using the entropy weight method of spatio-temporal extreme difference. This paper conducts an empirical study based on the data of 30 provinces and cities from 2005 to 2020, and the results of the study find that green finance has policy incentive effect and institutional incentive effect, and can significantly and positively affect the development of low-carbon economy, and the findings still hold after endogeneity test and robustness test. The mechanism test shows that green finance can influence low-carbon economic development by promoting industrial structure upgrading, green technology innovation and FDI inflow; moreover, the positive promotion effect of green finance is more obvious in the western region and non-Yangtze River Economic Zone region; finally, the moderating effect test reveals that the institutional environment and the level of technology market development can enhance the relationship between green finance and low-carbon economic development.

Faktory daňovej politiky ovplyvňujúce medzinárodnú konkurencieschopnosť krajiny

International tax competitiveness is a key factor in the global environment that significantly influences the economic dynamics and the position of countries in the global market. This paper aims to provide a comprehensive view of how tax policies and incentives affect international competitiveness, economic growth and FDI inflows. The paper systematically reviews 64 studies focusing on key factors and determinants of tax competition such as innovation, tax system and tax burden, which play an important role in enhancing a country's attractiveness. It presents a review of the literature dealing with these factors through the databases Research Gate, Science Direct, Scopus and Google Scholar. This paper also highlights the need for further analysis of policy instruments that can improve the effectiveness of tax policy, stimulate innovation and improve the attractiveness of investment.

Renewable energy and industrial innovation: Catalysts for economic and trade growth

Modernizing and diversifying industries have become essential in recent years, particularly with the shift toward new energy sources to boost the global economy. Despite widespread initiatives, the economic impact of these reforms remains uncertain. This study examines the effects of Saudi Arabia’s renewable energy and industrial innovation efforts on key economic variables, aligning with the UN Sustainable Development Goal 8 (SDG 8), which emphasizes inclusive and sustainable economic growth, full and productive employment, and decent work for all. Using an ARDL model, we analyze data from 95 firms operating in the renewable energy sector from 2000 to 2023. The findings reveal that renewable energy investments significantly enhance long-term economic growth, trade balance, and FDI inflows, though their impact on employment and foreign assets is weaker. Industrial innovation also promotes growth and trade, but less so than renewable energy, with sales growth driving foreign asset accumulation. In the short term, both sectors have limited effects on employment and foreign assets. However, when combined, renewable energy investments and industrial innovation amplify their positive influence on GDP and trade, underscoring the need for long-term strategies to sustain economic growth.

Problems of Coupling the EAEU and the Organization of Turkic States in Modern Conditions

Historically, the Organization of Turkic States (OTS) prioritized political, cultural and humanitarian fields of multilateral cooperation. However, authors demonstrate that OTS has now taken a course to expand economic cooperation within the association and is taking consistent regulatory and institutional steps to do so. The main reason for the introduction of the economic agenda is the understanding of the insufficiency of political and humanitarian projects based on Turkic identity, culture and language to expand its influence in the region. At the same time, such development inevitably intersects with Eurasian integration and creates risks for Russia. The authors highlight that the size of the economies of the OTS countries is inferior to the economic power of the EAEU countries, however, the Turkic states illustrate a more dynamic growth than the EAEU and the world as a whole. Trade and FDI flows between the EAEU and OTS take place mainly in the bilateral format between Turkey and Russia for limited commodity nomenclatures (oil and metals) and investment projects (logistics). Despite the active humanitarian and cultural work of the OTS, the trade and investment connectivity of the countries does not yet reflect the implementation of the relevant initiatives laid down in the "Vision of the Turkic World-2040". The analysis demonstrates that for members of two organizations (Kazakhstan, Kyrgyzstan and Uzbekistan, which has observer status in the EAEU) Russia and the EAEU have a large economic role, but the Central Asian states support further integration within the OTS as part of their multilateral foreign policy. The role of Russia and the EAEU in the scenario of deepening integration within the OTS increases significantly, since it is the Russian Federation that is considered as a key player capable of balancing Turkey's regional influence by external actors. Based on this, the article suggests scenarios for further interaction between the EAEU and the OTG, which will allow to mitigate the long-term risks of Turkey's growing influence without switching to open confrontation and move away from the current tactics of ignoring the association. In particular, the authors consider the prospects for cooperation in the fields of «green economy», logistics, energy, science and education.

Brazil On The Rise: The Interplay Of Political Instability, FDI, And Resurgent Economic Growth

Similar to numerous other emerging economies, Brazil has experienced a significant increase in foreign investment during the past few years. In 2022, the global inflows of FDI amounted to US$ 1.29 trillion, reflecting a 12% decrease compared to the previous year. This decline can be attributed mostly to substantial divestments undertaken in Brazil. The objective of this study is to examine and assess the subsequent aspects of political stability on FDI and Brazil's broader economic growth. The present study used an ARDL technique to analyze the years 1996 to 2022, utilizing secondary data. The results suggest that the presence of political stability has a positive impact on foreign investment, commercial activities, and the overall economy of Brazil in the long term. The stability of policies is intricately linked to the political system of a nation and exhibits a positive correlation with both FDI and foreign portfolio investments. It is recommended that the administration abstain from implementing any arbitrary modifications presently in order to retain policy coherence.

Impact of FDI Inflows on Economic Growth and Startup Development in India: An Empirical Analysis

Aim: This study explores the linkage between FDI inflows and economic growth in India, particularly emphasizing the impact of sectoral FDI inflows in merchandise and services on the establishment and growth of startups in the country. Study Design: The study includes both descriptive and analytical approaches to examine how sectoral FDI inflows contribute to economic growth and foster the growth of startups in India. The study in the analytical section tries to identify significant relationships and the causal links between sectoral FDI inflows and economic growth. Place and Duration of Study: The study is based on the quarterly data from March 2016 to December 2023, following the launch of the "Startup India" initiative, which is sourced from the RBI database. Methodology: The study employs OLS regression to identify short-run significant relationships and Granger causality tests to explore the causal links between sectoral Foreign Direct Investment inflows and economic growth. Results: The study reveals that the Sectoral FDI Inflows in India positively and significantly (i.e., 21.48%) influence the country's economic growth. Further, the inflow of FDI is a unidirectional causality from FDI inflow to economic growth. The outputs are highly applicable to policymakers in the formulation of policies on FDI inflow. Conclusion: The study concluded that sectoral FDI inflows have significantly impacted economic growth and helped develop start-ups in India.

Do Environmental, Social, and Governance (ESG) Factors Affect Foreign Direct Investment in Asian Countries?

FDI inflows into Asian countries, especially emerging economies, have continued to increase significantly, even during the COVID-19 pandemic, contributing to an average of 30% of FDI globally from 2010 to 2022 (UNCTAD, 2023). Numerous earlier research has examined the variables influencing FDI attraction, however, we focus on clarifying how ESG factors influence the attraction of FDI capital flows in 31 Asian countries from 2010 to 2020. The governments in the region have prioritized sustainability in their construction industries and set some of the most aggressive green targets (Pan, 2021). The study applies the least squares regression model, the random effects regression model, and the fixed effect regression model. Notably, FDI inflows show a positive correlation with lower CO2 emissions per capita. However, the impact of the Human Development Index (HDI) on FDI remains inconclusive, as higher HDI levels could either attract or deter foreign investments due to labor cost variations and regulatory factors. Or vice versa, countries with a high HDI can attract FDI, but empirical evidence from the research sample does not indicate a correlation between HDI and FDI. In contrast to our initial assumptions, HDI does not correlate with FDI attraction in Asia's developing nations. Received: 9 January 2025 / Accepted: 23 February 2025 / Published: 02 March 2025

Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold

The study investigates the nonlinear relationship between financial development and economic growth, with a particular focus on the mediating role of FDI in low- and middle-income countries. Using annual panel data covering 81 countries from 1990 to 2019, the study applies a dynamic panel threshold regression model to identify the level of financial development at which its impact on economic growth changes. The analysis incorporates FDI as an additional conditioning variable to examine how its interaction with financial development influences the threshold dynamic. A significant threshold effect: below a certain level of financial development, the impact of FDI on growth is statistically insignificant, while above the threshold, FDI exerts a strong positive influence on economic growth. The findings imply that the growth-enhancing effect of financial development is not automatic and depends on reaching a critical level of financial maturity, as well as an enabling environment that leverages FDI inflows. The study contributes to the literature by offering empirical evidence of a nonlinear, FDI-conditioned finance-growth nexus, and it provides policy guidance for developing economies aiming to optimize the benefits of financial sector reforms. Doi: 10.28991/HEF-2025-06-01-013 Full Text: PDF