FDI Inflows Research Articles

Foreign Direct Investment in Less Developed Countries: Do Institutions Still Matter? Evidence for Central African Countries

This paper analyses the FDI flows determinants in less developed countries with evidence in Central African countries. We mention that if institutions matter in attracting FDI flows; this is not only due to good institutions or political regime types as focused in economic literature but also due to economic sectors which must be considered as investors decision procedure.

Priliv stranih direktnih investicija u funkciji poboljšanja konkurentnosti privrede Republike Srbije

The aim of this paper is to review the current international competitiveness of the Republic of Serbia, as well as the conditions and indicators of business in the Republic of Serbia, in order to determine progress compared to the previous period, discover obstacles and present ways to overcome them. The paper is based on the fact that Serbia's competitiveness, although it has been increasing in recent years, is still relatively low as a result of a number of gaps and that, among other things, it is necessary to increase the inflow of FDI, which in the past was significant for GDP growth, as the competitiveness of the economy of the Republic of Serbia would increase.

Lost Generations Losing Generation: the Consequences of the Demographic Crisis in the Western Balkans

The countries of the Western Balkans are facing a serious demographic crisis due to a declining birth rate that is in line with European trends, and the situation is exacerbated by high levels of migration, mainly towards the European Union. A cheap, well-educated labour force from the Balkans has been working as guest workers in Western European countries since the late 1960s, a tradition that has continued and even intensified since then. The exodus of the population, especially young and skilled workers, is already leading to labour shortages in the region, which discourages the inflow of FDI that would be essential for development. Outlining the current demographic trends, this paper concludes that the demographic crisis in the Western Balkans is irreversible; governments are failing to provide adequate incentives to increase birth rates, while labour and brain drain increases.

Effect of Economic Growth on the Environment in Bangladesh

The objective of the study is a practical investigation of the Environmental Kuznets Curve (EKC) hypothesis in the case of Bangladesh. Data used is from 1986 to 2014. Data has been collected from the official world bank databank website. The autoregressive distributed lag (ARDL) approach will be used for the short-run analysis and a vector error correction model (VECM),a bounds test for cointegration will be used to find the long-run relationships. We will be examining the dynamics between economic growth, foreign direct investment, and energy consumption with carbon dioxide emissions in Bangladesh. We find that income has a very modest negative effect on the environment and pollution in the long run. Energy consumption is discovered to be a bigger contributor to carbon dioxide emissions in the country, especially in the short run. In the case of FDI inflow, the relationship is found to be negative with environmental degradation, but in the long ,haul the value does gravitate towards a positive link, however negligible.

Simulation of the impact of foreign direct investment on the Ukraine’s economy in the conditions of post-war reconstruction

The article examines the dynamics of accumulated foreign direct investment in the economy of Ukraine in 2010–2021 and analyzes the reasons for the significant decrease in FDI inflows to the economy of Ukraine, the withdrawal of significant amounts of capital by foreign investors in periods of deepening economic crisis. The structural changes of foreign direct investment in the Ukrainian economy by types of economic activity and by industry for the period 2015–2021 are analyzed. With the help of regression analysis, modeling of the dependence of economic growth of Ukraine on changes in the volume of foreign direct investments was carried out under the condition that the war ends in 2023. To build a linear regression model, data on the GDP of Ukraine, GDP per capita, the volume of accumulated FDI in the economy and their annual revenues, the volume of FDI in the main sectors of the economy in 2010–2021 and the forecast values of these indicators in 2023–2025. The results of the study confirmed the importance of increasing both the total volume of FDI and the volume of investment involved in high-tech industries industry, to restore the economy of Ukraine after the end of the war. Regression analysis made it possible to reveal a direct connection between the economic growth of Ukraine and the volume of accumulated FDI in the economy and their annual inflow. Based on the model of linear dependence of Ukraine's economic growth on foreign direct investments, forecast scenarios of changes in Ukraine's GDP in actual prices and GDP per capita in 2023 were developed, provided that the volume of accumulated FDI in the economy increases. As a result of the study, no statistically significant dependence of the economic growth of Ukraine on the volume of accumulated FDI in the metallurgical industry and in the in the field of information and telecommunications sector was found. The regression analysis confirmed the significant direct dependence of Ukraine's economic growth on the volume of FDI involved in the machine-building industry, which proves their important role in the implementation of post-war economic recovery projects of Ukraine.

Forecasting of FDI Inflow in Indian Automobile Industry

Forecasting of FDI Inflow in Indian Automobile Industry

UNDERSTANDING THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH; AND ITS DETERMINANTS: A REVIEW OF LITERATURE AND EVIDENCE

In the last few decades, there has been a lot of discussion in the economic literature about the link between FDI and economic growth; and its determinants. This paper reviews the literature dealing with the same. The findings presented on the particular topic show that the links between them are somehow conflicting and it is a bit difficult to draw a clear conclusion. Some of the scholars argue that FDI promotes technology transfer and spillovers; uplifts institutions, human capital, and infrastructures, and boosts market conditions. While other pessimists believe that FDI may lead to dependency on foreign capital, external vulnerabilities, and destructive competition of foreign affiliates with domestic firms. This paper also investigated on some empirical findings on the determinants of FDI and presented that tax rates, physical infrastructures, legal framework, low wage rate, trade barriers and government policies were major determinants of FDI inflow.

Foreign Direct Investment in Vietnam: A Comparison of Forecasting Performance

In recent years, FDI has made a significant contribution to the economic development of Vietnam, especially in the manufacturing and processing sectors. To forecast the FDI inflow into Vietnam in the future, a research team used indicators such as the number of investment projects, the total registered capital, and the total implemented capital. These indicators were collected from the General Statistics Office to forecast the level of FDI attraction in Vietnam in the coming years. This study includes annual data on the number of FDI investment projects in Vietnam collected from 2000 to 2022. The forecasting methods used in this study include the Autoregressive Integrated Moving Average (ARIMA) model, additive time series forecasting, Holt-Winters forecasting, and linear regression forecasting using Mini-tab 18.0 software. After analyzing the data on the number of FDI investment projects in Vietnam from 2000 to 2023, the research team collected results and compared the accuracy of the forecasting models based on three metrics calculated from the forecasting models, which are MAPE, MAD, and MSE. The comparison of the metrics showed that the Time Series method is the most suitable forecasting method with the lowest MAPE and MAD values compared to the other three models, while the MSE value of the Time Series model is only higher than the ARIMA model and still lower than the other two models. With the comparison results of the forecasting models, the study found a suitable forecasting model for each time cycle.

The Regional Comprehensive Economic Partnership (RCEP): an analysis of its potential benefits for China

Regional Comprehensive Economic Partnership (RCEP) is a mega-regional free trade agreement aimed to remove tariff and non-tariff trade barriers, increase trade facilitation, liberalise investment, and promote global value chains among the member countries. The study aims to know the importance of RCEP regarding trade, foreign direct investment and other economic affairs for China and its potential economic benefits for members. It has provided for a 90% tariff reduction on trade among its 15 members. It can potentially increase trade and FDI inflow to China through the trade and FDI creation effects. Establishing a business-friendly market in the Asia Pacific region and the tariff reduction provisions of this agreement have many advantages for the Chinese economy. Among its members, China is the leading economic power. Therefore, she will get maximum economic benefits as, according to statistical simulations, it will increase her international trade, exports, services, and FDI inflow. The current 2.2% tariff imposed on Chinese exports in the RCEP market will be decreased to 0.4%. The expected economic profit to China from this agreement is 214 billion dollars, equal to 2.2% of its GDP and a 13.4% increase in FDI inflow.

Does agriculture-led Environment Kuznets Curve Exist in the Emerging Economy of Nigeria?

The quest for environmental sustainability is crucial to every serious government, most especially the emerging economies where environmental degradation poses greater threat to the path of growth. Thus, this study set out to investigate the agriculture-led environmental Kuznets curve in Nigeria to ascertain its validity. Data is sourced from the world-bank data from 2081 to 2019 for the purpose of estimation. The econometric procedure begins with the stationarity test which indicates a mixed order of integration. This suggests the adoption of the ARDL approach as the best method of estimation for the model of the study. The result revealed a no evidence of agriculture-led environmental Kuznets curve in Nigeria. Further result indicates that FDI inflow into Nigeria is pure and does not cause any hurt to economic growth of Nigeria. Energy consumption is discovered to be the key promoter of carbon emission. Therefore, policy guide is provided for the policy makers for the need to expand the agriculture activities and to manage it more efficiently thereby generating higher output. Alternative energy sources such as renewable energy is recommended for the economy of Nigeria for purpose of averting pollution

Perceptive FDI in Relation to Ease of Business: An empirical Analysis of Asian Countries

This study examines the FDI perceptive in relation to ease of doing business an empirical analysis of Asian countries. This study was applied the economic integration and foreign direct investment theory in formulating hypotheses that guide the results analysis. In this study the independent variable is Foreign Direct Investment which is measured by GDP which are measured by sub variables. The present study has been used the econometrics analysis, to find the empirical relationships and key regions for trying to attract FDI net inflows, use the liner regression method. For the years 2010 through 2019, this study includes examines 34 Asian economies, including Pakistan, Afghanistan, Iran, India, Bangladesh, Sri Lanka, and many others. The main takeaway from this is that a better-rated business environment is much more likely to draw larger inflows of FDI. All indexes have inverse connections, according to the regression estimation, with the exception of trading across borders, receiving credit, and registering properties. Furthermore, all factors—aside from paying taxes, dealing with insolvency, or shutting down operations in the region—are most likely to have an impact on FDI inflows.

해외직접투자가 경제성장에 미치는 영향

Purpose – The purpose of this study is to shed new light on the impacts of FDI by multinational corporations on the economic growth of the host country. Design/Methodology/Approach – This study compares and analyzes the different impacts of existing FDI inflows and local added value creation of multinational corporations on the per capita national income of the host country. In addition, this study conducted a fixed-effects panel model analysis on a sample of 42 countries from 2005 to 2016 of the OECD's Analytical AMNE database. Findings – First, as a result of panel analysis of a fixed-effect model that controlled for the effects of individual countries and major macroeconomic and policy variables, the share of local value-added creation of subsidiaries of multinational corporations had a significant positive impact on the growth of per capita income in each country, but the share of FDI inflows did not have a statistically significant impact on the growth of per capita national income. Second, the results of analysis by dividing the sample into developed and developing countries also confirmed that the share of local value-added creation of subsidiaries of multinational corporations has a positive effect on economic growth in both developed and developing countries. In addition, the impact of FDI on economic growth is greater in developing countries than in developed countries. On the other hand, the share of FDI inflows had a positive effect on the economic growth of developing countries, but had no significant effect on the economic growth of developed countries. Research Implications – In identifying the relationship between FDI and national economic growth, it was confirmed that the use of the OECD's Analytical AMNE statistics is more appropriate than traditional FDI data.

Terrorism and Tourism Demand in Terror Affected Island

Sri Lanka is an island and is becoming an attractive tourist destination in South Asia. It has famous beaches, mountainous regions, many colonise features, UNESCO world heritage sites, wild life, traditional festivals, and unparalleled climate generate extra topographies to attract more and more international tourists. However, Sri Lanka is badly affected by terrorism. Henceforth, this study examines the impact terrorism on inbound tourism along with other important factors, for instance, FDI and World GDP. Long run estimates are obtained through DOLS after confirmation of cointegration. World GDP and FDI have positive effect on tourism. Terrorism has negative impact on inbound tourism in Sri Lanka. The tourism in Sri Lanka remained stagnant between 1978 and 2009 because of terrorism. Since 2009, there is sharped increase in tourism arrivals as a result of remarkable decrease in terrorism activities. Results of VECM confirmed causality from terrorism to tourism. This finding revealed that terrorism is badly affecting tourism in Sri Lanka. Similarly, terrorism is affecting FDI inflows to Sri Lanka. Moreover, these results confirmed that tourism and FDI are engaged in complementary effect with each other. If Sri Lanka enabled itself well to maintain peace in country its effect will be multiple. Elimination of terrorism will improve tourism development which in turn will bring economic development as travel and tourism industry contributes 11.1 % to GDP, and 10 % to country employment. Similarly, better security situation will also help in attracting more FDI. Besides this, FDI and private investment has to be encouraged to build new hotel rooms to accommodate influx of tourists.

Foreign Direct Investment Effect on Economic Growth in Selected Asian Countries

The purpose of this study is to examine the impacts of foreign direct investment (hereafter FDI) on economic growth in selected Asian countries: Brunei, Indonesia, Malaysia, Thailand, and Vietnam. The study also utilizes instrumental variables including regulatory quality, government effectiveness, corruption control, political stability and absence of violence, voice and accountability, and rule of law to explain differences in institutions and macroeconomic policies in the host countries. Data was gathered from the World Bank and the Worldwide Governance Indicators(hereafter WGI) between 2002 and 2019 and analyzed using ordinary least squares(hereafter OLS), two stage least squares(2SLS), and generalized method of methods(hereafter GMM) methodologies. These selected Asian countries have seen higher FDI inflows in recent years, it is important to figure out the reason, and we would like to concentrate on the influence of FDI on economic growth in each of these Asian countries, together with the effect of these instrumental factors on FDI. This study show that the impact of FDI on a country’s GDP growth rate is dependent on the economy’s institutional quality. The FDI and domestic investment are positively connected and have an influence on economic growth in these selected Asian countries when instrumental characteristics such as accountability, corruption control, political stability, and the absence of violences are taken into account. The country’s macroeconomic policies and institutional stability have an impact on its economic growth. For FDI-driven growth to materialize, comprehensive institutional stability and macroeconomic policies are required.

Investigating the Crowding Out Effect of Foreign Direct Investment in South Asian Economies

Foreign Investment (FDI) in developing economies affects the supply of capital affecting local investment. This international practice can either be analyzed through substitution effect (crowding-out) or complementary effect (crowding-in). The former discourages local investors due to competitive pressure while the latter impacts the demand of domestic suppliers. This study intends to explore whether FDI crowds out domestic investment or not. The study analyzed the FDI-led capital formation hypothesis considering the panel data of South Asian economies for the time span of 1991- 2021. The study has utilized the fixed effect, FMOLS and DOLS techniques to analyze the data using FDI inflows. The empirical evidence of the study affirms the crowding in effect for the selected South Asian economies, The study suggests that internationalization, financial inclusion and |macroeconomic stability are potential channels to foster domestic capital in South incl countries.

The Enabling Environment for Official Development Assistance and FDI Inflows: An Empirical Evidence from Djibouti

By leveraging the best of its strategic and economic advantage and investing in transportation and port facilities, Djibouti has seen amazing progress over the past ten years. However, there are reservations regarding the inclusivity and stability of this expansion in the future. The current research investigates the enabling environment for official development assistance and FDI inflows in Djibouti from the period 1997 until 2020. To examine the impact of key socioeconomic and governance indicators on ODA and FDI inflows, the study used simple ordinary least squares and quantile regression. The results showed that, in the case of official development assistance, variables like GDP and multilateral debt maximize foreign aid to Djibouti. Contrarily, the country's regulatory environment and government effectiveness do not support international assistance. However, the results of FDI showed that Djibouti is more attractive to FDI inflows when there is a greater level of transparency in the rule of law and spending in the health sector. Additionally, the country's regulatory quality, voice accountability, and low population growth rate all contribute to a decline in FDI inflows. Last but not least, the GDP and domestic credit to the private sector indicate a negligible influence in creating a desirable climate for FDI inflows, which is somewhat accurate given the weak economic position of the nation. According to the conclusions, Djibouti should modify its governance structure and implement suitable structural transformations that preserve and appeal to multinational collaboration rather than concentrating primarily on domestic businesses. Finally, the government must liberalize the market, enabling international businesses to freely operate there, while also offering them the support they require, such as fair taxation and stability.

Re-examining the relationship between Foreign Direct Investment and Economic Growth in Nigeria

This study examined the impact of foreign direct investment on Nigeria economic growth at large using time series data from World Bank Development Indicators. The research employed Auto Distributed Lag Model (ARDL) to investigate the impact of FDI on Nigeria economic growth both in the short-run and long-run. It was revealed that foreign direct investment has positive significant impact on Nigeria economic growth within the period under review. The research therefore concludes, that foreign direct investment has significant impact on Nigeria economic growth collaborating the earlier findings in theoretical and empirical literatures. The research therefore, recommends among others that Nigeria government and other West-African countries should invest more in infrastructural development and on R&D to increase the country domestic firm absorptive capacity and inflow of FDI in the country.

Determinants of foreign direct investments in Central Asian countries

The main purpose of this study is to examine the factors that determine FDI inflows to five countries in Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan). An empirical analysis covering the period of 1995–2021 was made in the study. Dynamic panel data analysis methods were used in the empirical analysis. The model was created by using five different variables (FDI in the previous period, economic growth, real effective exchange rate, macroeconomic stability and infrastructure) that are thought to affect FDI in Central Asian countries that are close to each other in economic terms. The created model was analyzed with the Generalized Moments Method (GMM) proposed by Arellano and Bond [1]. According to the results of the GMM estimation method, it is seen that the lagged value of FDI, economic growth, real effective exchange rate, macroeconomic stability variables are statistically significant and explain the dependent variable to a large extent. On the other hand, the infrastructure variable does not affect foreign direct investments. This study explores developing Central Asian countries, including Kazakhstan. The results of this study are important in knowing the factors that determine foreign direct investments in Central Asian countries. As a result, it can be thought that the success of the investments in the past period will encourage more foreign investment inflows in the following years. Economic growth of Central Asian countries is an important factor in influencing FDI. Fast-growing economies attract more FDI. Therefore, Central Asian countries need to take steps to create a suitable investment climate by eliminating macroeconomic problems such as inflation, insufficient infrastructure, and exchange rate instability in order to increase the amount of FDI.

FDI and Exports in Developing Countries: Theory and Evidence

Multinational enterprises (MNEs) not only generate global flows of foreign direct investment, but are also extremely for global trade flows. UNCTAD (2004) estimates that MNEs account for around two-thirds of world exports. Since MNEs are responsible for a large proportion of world trade, one may infer that there is a close relationship between flows of FDI and trade. An MNE network, consisting of a parent and a network of affiliates, generates simultaneous flows of goods and investments. In this context the pool of knowledge and associated models, which explain international trade, has grown substantially in the recent past, but there is less theoretical consensus about the relationship between trade flows and FDI. The fact that exporting and local production are alternative ways for an MNE to serve the demand in a foreign market suggests a substitutability relationship between FDI and trade. MNE production in the host country implies that local production is a substitute for exports from the home country. On the other hand, MNE affiliates’ production in a host country can generate a demand for intermediate goods from the parent, resulting in a complementary relationship between flows of FDI and trade (exports). Theoretical reasoning therefore supports both these possibilities, providing a strong incentive for empirical analysis

The Determinants of Foreign Direct Investment in Pakistan: an Empirical Investigation

The changing modes of international transactions and the cross-border mobilisation of factor resources, in pursuance of transnational production, constitute new dimensions for sustained economic growth. Foreign Direct Investment (an influential element of this process) is defined as the source of acquisition of managerial control by a business enterprise of a foreign country over a business activity in a host country [Graham (1982)]. The changing perceptions and more attractive policies of the host developing nations have changed the destinations of FDI flows from industrially developed countries to high growth developing centres. FDI stock held by developing countries has risen from $ 132.95 billion in 1980 to $ 1438.48 billion in 1999. Their share in inward stock has reached to 30.14 percent in 1999 as against 26.2 percent in 1980. FDI inflows during this period were raised from $ 4.42 billion to $ 208.0 billion, at an annual growth rate of 22.5 percent while GDP growth rate for that period was 3.9 percent.