FDI Inflows Research Articles

Global value chains participation and environmental pollution in developing countries: Does digitalization matter?

AbstractThe study analyses the effect of global value chains participation (GVCP) on CO2 emissions and assesses whether digitalization technologies can enhance environmental quality. We use panel data estimation techniques for 112 developing countries over the period 1990–2018. Findings show that the GVCP contributes to environmental degradation. Other factors that increase environmental damage include FDI inflows, industrial value‐added and electricity consumption. However, renewable energy consumption significantly reduces CO2 emissions. Findings show that digitalization is an effective channel in reducing CO2 emissions in the GVCP in developing countries. These findings have important policy implications in exploring the GVCP's development dynamics in upgrading opportunities from digital technologies to reduce environmental pollution and promote sustainable growth in developing economies.

Analyzing the Impact of FDI in the Automobile sector: An Empirical Study with Special Reference to India

Abstract: Indian automobile industry has grown rapidly and become a major contributor to the country's economy. It produces a wide range of vehicles like cars, motorcycles, commercial vehicles, and tractors for both Indian and international markets. The industry has attracted investments and boosted related industries like component manufacturing. The Indian government has implemented favourable policies to support the sector, including initiatives for electric vehicles. In this paper growth and progress of the Indian automobile industry are studied using secondary data for the period of 2011-12 to 2021-2022. The study found that, FDI inflows and its share in total FDI both significantly increased in the years 2021–2022. Consistent FDI inflows into the automobile industry promote related to technology advancement, the creation of employment opportunities, and the growth of India's automotive sector as a whole.

Credit Rating as A Determinant of FDI Flows in Egypt

Credit Rating as A Determinant of FDI Flows in Egypt

Nexus of innovation, renewable consumption, FDI, growth and CO2 emissions: The case of Vietnam

Governments around the world have enacted many policies to reduce environmental pollution and carbon dioxide (CO2) emission. This study aimed to determine and understand the relationship between innovation, renewable energy consumption, foreign direct investment inflows, economic growth and CO2 emission in Vietnam. Information was collected annually based on the annual data of the General Statistics Office of Vietnam and World Bank from 2000 to 2022. The authors use the unrestricted fixed effects to resolve the study problems and using panel data method. The results indicate that innovation positively affects environmental pollution in Vietnam. However, renewable energy consumption has a negative effect on environmental pollution in Vietnam. In addition, FDI inflows and economic growth have strongly positive effects on environmental pollution. This paper also provides some recommendations that can assist Vietnam in developing a green and sustainable economy in the technology revolution 5.0 to achieve the United Nations Sustainable Development Goals (SDGs) over a long-term period.

Effect of the zero-covid policy on Chinese FDI inflows and government’s response: Has the Pandemic led to distinctive paradigm change in China’s hypergrowth approach to development?

Effect of the zero-covid policy on Chinese FDI inflows and government’s response: Has the Pandemic led to distinctive paradigm change in China’s hypergrowth approach to development?

The Impact of the China Railway Express on FDI Inflows in Chinese Prefecture-level Cities

Abstract Operating the China Railway Express (CRE) is a primary strategy for promoting international trade and investment between China and Europe. Since the inception of the CRE in 2011, the number of operational routes and connected cities has steadily increased. This study investigates the impact of the establishment of the CRE on foreign direct investment inflows in Chinese prefecture-level cities. To perform our analysis, we used panel data of 250 cities in China from 2004 to 2018, and applied the difference in differences (DID) model as a quasi-natural experiment. The results demonstrated that the operation of the CRE had a positive and significant impact on urban FDI inflows, particularly in small and medium-sized cities, low-income cities, and inland cities in China. The robustness of the results was verified using the DIDM and PSM-DID methods.

Investment Activity un the Conditions of Global World Crisis, Features, and Prospects

In the context of global competition and technological progress, an increasing number of factors influence the economies of the world. With the outbreak of the war in Ukraine, there have been dramatic changes in global investment trends. The war has repercussions far beyond its immediate surroundings, causing a cost-of-living crisis that affects billions of people around the world while rising energy and food prices depress real incomes and exacerbate debt tensions. Investor uncertainty and risk aversion could put significant pressure on FDI flow this year. The impact on investment flows to developing countries in 2022 and beyond is difficult to predict. The research aims to establish the regularity of the state of investment activity in the context of the global world crisis and to determine the features and prospects of investment activity development. This can be done by conducting a regression analysis to reflect the dependence of the impact of factors on the level of investment activity in 25 economies of the world according to the Global Outsourcing Attractiveness Index between the results of legal adaptability and corporate performance. To check the level of investment activity it is necessary to analyze the state of FDI flows by regions, economies, and countries. Research methods: method of information synthesis; regression analysis; systematization, generalization, comparative analysis. Results. It has been established that as a result of regression analysis, the value of the coefficient of determination indicates that the regression model explains 78% of the dependence of the level of investment activity in 25 economies of the world between the results of legal adaptability and corporate activity. This indicates that there are still a small number of other factors influencing the level of investment activity that is not included in the regression model. It has been determined that global FDI flows recovered to USD 972 billion in the first half of 2022. However, most of the increase was in the first quarter, while global FDI flows decreased by 22% in the second quarter of 2022 compared to the previous quarter. This was caused by rising inflation and interest rates, and rising energy prices, due to Russia’s full-scale invasion of Ukraine. The study found that FDI flows recovered significantly in all regions of the world. It was found that FDI increased sharply in some European countries after the negative inflows recorded in the second half of 2022, the latter was also driven by significant growth in Australia, Germany, Mexico, Spain, and Sweden, whose FDI inflows increased by more than USD 15 billion. It has been revealed that the United States was the leading recipient and investor of FDI worldwide in 2021.

The Infrastructure and Foreign Direct Investment: The Case of Selected Arab Countries

Objectives: This study aims to investigate the role of infrastructure in attracting foreign direct investment in selected Arab countries during the period 2007-2019 using annual data. The sample of the study utilizes panel data representing thirteen countries of the Arab region.
 Methods: The study employs the ordinary least square (OLS) regression model to analyze the panel data. The study model includes the infrastructure index, trade openness, real GDP growth, and the corruption index as independent variables. At the same time, the net flow of foreign direct investment has been identified as a dependent variable.
 Results: The study’s results indicate a direct and statistically significant relationship between infrastructure, GDP growth, and trade openness to FDI flows, while the results indicate a statistically significant inverse relationship between the corruption index to the selected Arab countries.
 Conclusions: The study’s variables may be considered important determinants for attracting foreign capital represented by foreign direct investment. Furthermore, Arab countries still need more projects to improve infrastructure quality.

Revisiting the Nexus between Economic Policy Uncertainty, Financial Development, and FDI Inflows in Pakistan during Covid-19: Does Clean Energy Matter?

The significance of FDI for economic progress has been well established, especially for developing nations; conversely, the critical role of macro determinants has also been explained in attracting FDI. the motivation of the study is to assess the impact of economic policy uncertainty, financial development and clean energy on FDI in Pakistan economy. the study employed several econometric tools in assessing and documenting the elasticities of EPU, FD and CE in the process of amplifying the inflows of FDI in Pakistan. According to the study findings, it is apparent that financial development and clean energy positively affect FDI, while the effects of EPU are established as adversely connected to FDI. Study findings suggest, in Pakistan, for attracting and targeting the continual inflows of FDI, it is imperative to offer economic sustainability and efficient financial intermediation.

An investigation of exchange rate, exchange rate volatility and FDI nexus in a gravity model approach

ABSTRACT This study assesses the significance of exchange rate and exchange rate volatility in the bilateral inflows of FDI using a gravity model, based on a sample of 40 countries over the period 2001 to 2019. This analysis is also specifically concerned with the estimation challenges which revolve around the validity of the log-linear transformation of the gravity equation in the potential presence of heteroscedasticity and zero FDI observations. The various alternative estimation techniques, all validate the fact that exchange rate volatility has a negative impact on the bilateral inflows of FDI whereas exchange rate depreciation has a positive and significant coefficient. On the other hand, the variables GDP-host and GDP-Home are positive and significant justifying that the host and home countries’ economic sizes remain factual elements in attracting FDI. The models’ estimates also interestingly validate the fact that geographical distance and tax level have a sizeable negative influence on the bilateral inflow of FDI. Besides, the significance of the dummy variable common language confirms a negative causal effect of a communication barrier between the local workers and foreign investors.

How does political risk matter for foreign direct investment into Arab economies?

ABSTRACT The present paper extends previous work by Burger et al. ([2016]. Risky business: Political instability and sectoral greenfield foreign direct investment in the Arab world. World Bank Economic Review, 30(2), 306–331. https://doi.org/10.1093/wber/lhv030) that has attempted to investigate empirically the impact of political instability on FDI flows into the Arab host region. Specifically, based on gravity model approach and annual panel dataset on bilateral FDI projects in Arab countries from 2003 to 2018 (12,240 projects), it explores the following research questions: how does a host country’s political instability and institutional fragility affect the bilateral inward FDI project? Is there any sectoral specificity to this impact if it exists? Which component of political risk poses the most threat for the foreign investor in a specific sector? The empirical investigation highlights the negative, significant and robust impact of perceived political risk in the Arab host-country. It also establishes that there is substantial heterogeneity in foreign investment reactions to political risk reflecting both differences in the component of political risk and sectoral characteristics.

Impact of Population, Trade Openness, and Foreign Investment on India’s Environment: An Empirical Evaluation of a STIRPAT Model

India is excelling in almost all parameters of economic development. However, India is experiencing economic development with a pinch of salt; massive climate and environmental changes are seen. As per Global Climate Risk Index 2021, India was ranked as the 7th worst climate hit country in the world. The present study is an attempt to empirically evaluate the impact of India’s economic growth, population, foreign investment, and trade openness on carbon emissions. The study adopts the STochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) framework augmented with the Environment Kuznet’s Curve (EKC) model with a time series data over the period 1971–2020. Results for unit root testing indicated the presence of mix stationarity for the variables, therefore, the autoregressive distributed lag approach was apt for capturing the long- and short-run dynamics. The results validated EKC for affluence and population. The outcome for FDI inflows and trade openness suggested the presence of pollution haven hypothesis for India. Policy initiatives toward green and sustainable production processes are suggested.

Impact of Foreign Direct Investment and Merchandise and Services Trade on the Economic growth in India: An Empirical Study

This paper attempts to study the possible link among FDI inflow, economic growth, merchandise trade and services trade of India during the post-liberalisation period 1998–99: Ql to 2008–09: Q3. The long-term relationships among the variables are analysed using the Johansen and Juselius multivariate co integration approach. Short and long run dynamics are captured through vector error correction models. To further investigate the interaction between the variables, the study uses impulse response function (IRFs) besides the above mentioned time series technique. Regression analysis is also done for the same time period. To test the parameter stability of the variables involved in the study, CUSUMSQ test is also performed. The study found the evidence of co integration among the variables, indicating diat a long-term relationship exists among diem. Bi-directional causality is observed between merchandise trade and economic growth, services trade and economic growth. Unidirectional causality is observed from FDI to economic growth and FDI to merchandise trade. A unidirectional causality is also observed from merchandise trade to services trade.

A BUSINESS IN NIGERIA SPECIAL ECONOMIC ZONE ON LEKKI FREE TRADE ZONE

Even though Nigeria’s special economic zone (SEZ) policies own their inception to the observed success of Lekki free trade SEZs on FDI inflows, job creation, and industrialization, hardly any attempt has been made by Nigerian researchers and policy makers to understand what exactly made lekki so successful. This thesis discusses the fundamental elements which contributed to the success of SEZ’s in Nigeria while drawing lessons to analyze the challenges facing the development of Nigeria’s zones. On the basis of analyzing such factors, I argue that China’s policies on SEZ’s cannot be expected to deliver similar performance levels when crudely applied to the geopolitical and economic disparities across Nigerian regions, rather, Nigeria’s SEZ policy requires careful identification of enabling factors, and implementation of supplementary policies for factors which differentiate it from China, while also taking into consideration some inherent similarities which can contribute its local success story.

FDI, international trade and global value chains (GVCs): India's GVC participation, position and value capture

Using OECD Trade in Value Added (TiVA) database (2021, 2022) and Asian Development Bank (2022) dataset, this paper indicates that though India's GVC participation rate has risen over time, it was lower than that of several economies in Asia-Pacific and its relative share in participation gains was marginal. Nevertheless, India's relative share in forward and backward GVC content to (and from) the region was not as peripheral. Raising net participation gains will require key enablers, and stimulating the mutually reinforcing FDI-GVC relationship by attracting quality FDI inflows. Findings based on the panel, fixed-effects model support the hypotheses that production-based GVC participation, revealed comparative advantage based on value-added exports, the country's relative economic size, and economic complexity (in medium-to-high technology manufacturing sectors) positively affect economic upgrading through capturing a greater share in world's domestic value-added in an industry while relative GVC position has a negative effect.

중국 FDI와 환율의 관계에 대한 실증연구

Purpose – Theoretically, exchange rate appreciation and exchange rate volatility may increase or decrease FDI inflows, and the results of empirical analyses are mixed. Given these inconsistent findings, this study aims to empirically investigate the effects of exchange rates and exchange rate volatility on FDI in China. Design/Methodology/Approach – To analyze the effects of exchange rate and exchange rate volatility on FDI, we first generate exchange rate volatility, monthly GDP data, and the difference between long-term interest rates in China and the U.S., and then set the time period of increased exchange rate volatility after 2012 as a dummy variable. We finally investigate the long run equilibrium and the short run dynamics by employing the time series ARDL model. Findings – The estimation results show that the FDI determination model exhibits a long-run equilibrium relationship. In the long and short runs, exchange rate appreciation, increased exchange rate volatility, and the interest rate differential between China and the U.S. inhibit FDI inflows to China. However, GDP growth promotes FDI inflows only in the long-run. Research Implications – By empirically investigating the effects of China's exchange rate and exchange rate volatility on FDI, we may evaluate whether the current reforms of the CNY exchange rate are all in the direction of stability and marketization.

An Empirical Investigation of the Impact of Foreign Direct Investment on Indian Economy

The present paper is an attempt to highlight the impacts of FDI inflows to India on Indian GDP. The study is purely based on secondary data which covers 10 financial years (2011-12 to 2021-22), and the analysis of which was made through the application of Karl Pearson’s coefficient of Correlation and Multi Regression OLS model (Ordinary Least Square). The study exhibited a strong positive correlation between foreign direct investment and GDP (r= 0.870) and indicated that FDI is the most important predictor of GDP with R square value of 0.757 which showed that FDI accounts for 75.7 per cent of variations in GDP; and b-value {Unstandardized co-efficient (B=39.679)} indicated that as FDI increases by one unit (1 billion), GDP increases by 39.679 units. It was further indicated through the results that if impact of FDI remain constant, then there are other factors which are explaining GDP up to 28571.885 units.

Political unrest, the Arab Spring, and FDI flows: A quantitative investigation

Political unrest, the Arab Spring, and FDI flows: A quantitative investigation

Information and communication technologies and employment in developing countries: Effects and transmission channels

This study analyzes the effect of ICT adoption on employment in developing countries. The empirical analysis covers 70 developing countries over the 1996–2017 period. To better characterize the labor market framework in developing countries, the empirical analysis incorporates the impact of ICT adoption on underemployment and labor underutilization. Using panel data techniques, the results show that ICT adoption increases employment, underemployment, and labor underutilization in developing countries. The main transmission channels identified are FDI inflows, human capital, and economic openness. As the main policy implication, policymakers in developing countries should intensify investments in the ICT sector and develop policies conducive to FDI inflows, human capital development, and economic openness to address employment issues.

Tourism-income inequality Nexus in Africa: evidence from SADC countries

ABSTRACT The tourism sector is one of the fastest-growing services sub-sectors worldwide and promises to unlock job opportunities and improve social inclusion outcomes in developing countries. We focused on the Southern African Development Community (SADC) region, which houses developing countries with high income inequality and constitutes attractive tourist centres in sub-Saharan Africa. We employed both the disaggregated and composite indicators of tourism development to investigate the tourism-income inequality nexus in the SADC region from 2010 to 2019. Utilizing the panel quantile regression approach, our overall results suggest that tourism development is inequality-worsening, and this is robust to both the composite tourism index and the individual tourism indicators (except in a few instances). While we established that net FDI inflows improve the inequality outcomes in the region, less corruption worsens inequality (except in a few cases). Accordingly, we offer relevant policy options for the governments of the SADC region.