Net Foreign Direct Investment Inflows Research Articles

Heterogenous Panel Modeling on Foreign Direct Investments in E7 Countries

With the spread of free economy conditions, the increase in the international mobility of capital has led to an increase in the number of economies that want to attract capital and the opportunities it will provide. In addition to this, capital owners have started to use free movement opportunities in order to maximize their own benefits. In this context, the factors affecting foreign direct investments including long-term capital flows have been the subject of many empirical studies. In this study which is carried out within the scope of the annual data of E7 economies for the period of 1992-2021, it is aimed to reveal the relationships between net foreign direct investment inflows and unemployment, liberal democracy, public expenditures, foreign direct investment outflows and short-term borrowing. In the study, in which the heterogeneous panel data method based on seemingly unrelated regression analysis was used, it was determined that the realizations under the influence of the selected independent variables differed by countries, but it was found that all the variables included in the analysis had a decisive role on foreign direct investment inflows.

Foreign direct investment and inclusive finance: do financial markets and quality of institutions matter?

AbstractWe examine the impact of foreign direct investment (FDI) on financial inclusion. To identify the causal effect of FDI on financial inclusion, we use plausibly exogenous source of variations in bilateral investment treaties (BITs) as a novel instrumental variable (IV) for net FDI inflows. Using annual data for a broad panel of 90 countries over the period 2004 to 2017, our results show that FDI improves financial inclusion for both “access to finance" and “use of financial services". This impact is more pronounced for relatively poor countries and developing countries compared to rich and developed countries. We also find that higher financial market development and quality institutions improve financial inclusion directly. Moreover, financial market development and institutional quality can serve as potential channels and moderating variables through which FDI affects financial inclusion. Our results are robust to various estimations and sample splitting and have important implications for policy on financial inclusion.

How Does the Exchange Rate and Its Volatility Influence FDI to Canada? A Disaggregated Analysis

This study investigates the relationship between the real effective exchange rate (REER) and its volatility with the net inflow of foreign direct investment (FDI) to Canada, placing a novel emphasis on sector-level analysis. The study utilizes time series data from 2007 to 2022 and employs the autoregressive distributed lag (ARDL) approach to assess short-run and long-run relationships between the said variables. The findings reveal significant impacts of changes in REER, its volatility, and GDP on net FDI in the short run, with lasting effects of REER and its volatility, lagged GDP, and trade openness on FDI in the long run. At the sectoral level, FDI inflows in energy and mining, manufacturing, finance, and insurance exhibit significant sensitivity to changes in REER. Simultaneously, the volatility of REER has a significant impact on FDI inflows in manufacturing industries and the finance and insurance sector in the short run. In the long run, REER exerts a significant influence on the net FDI inflows in energy and mining, as well as manufacturing industries. The asymmetry in findings suggests a need for sector-specific attention to retaining and attracting FDI to Canada.

The Role of Renewable Energy Consumption in Targeting Debt Sustainability in African and MENA Region Countries

The primary aim of this study was to explore the impact of renewable energy consumption on debt sustainability in African and Middle East and North African (MENA) countries. Other objectives were to be investigated including foreign direct investment net inflows’ effects on those countries’ public debt, besides the relationship between carbon dioxide emissions and their public debt. The Fixed Effects Regression Model for Panel data analysis was employed through the utilization of different variables data of 21 countries in Africa and MENA regions, covering the period from 1999 to 2021. The conducted regression analysis incorporated central government debt as a dependent variable, and carbon dioxide emissions, FDI net inflows, the government effectiveness index, credit to the private sector, and renewable energy consumption as explanatory variables. The results revealed the existence of direct significant relationship between renewable energy consumption and central government debt, suggesting that reducing public debt leads to lower utilization of renewable energy. This could imply that going for the objective of debt sustainability requires the prevention of the wide utilization of renewable and clean energy. However, this impact could be overcome or lessened or even mitigated if it is aligned with the presence of highly effective governments and stimulated by FDINI oriented towards climate change mitigation since Green foreign direct investment inflows promotes the sustainable development and debt sustainability specifically with the presence of inverse relationship between the latest variables and central government debt. One recommendation from this research is that attracting FDI that promotes sustainable development within the context of effective governments can reduce government debt and should be explored for attaining the main objective without harming the ecological system or causing environmental degradation.

Impact of the Exchange Rate on Economic Growth in Nigeria

This paper examines the impact of the exchange rate on economic growth in Nigeria. In particular, it investigates both the long-run impact, the short-run dynamics, and the long-run relationship of the underlined variables of the impact of the exchange rate on economic growth in Nigeria using the autoregressive distributed lag model (ARDL) and an error correction model (ECM). The results show that there is a positive relationship between the exchange rate and economic growth in the long run and a positive relationship between trade openness and economic growth in the long run. Foreign direct investment net inflows also have a positive relationship with economic growth. More specifically, the results indicate that a 1 percent rise in the exchange rate in the long run leads to a 0.006 percent rise in economic growth rates, and a 1 percent rise in trade openness and foreign direct investment net inflows in the long run increases economic growth by 0.12 and 2.27 percent, respectively. Given the positive impact of exchange rates on RGDP, maintaining a stable exchange rate environment is crucial, and policymakers should aim to implement measures that promote stability while also considering policies that enhance competitiveness. This may involve monitoring and managing currency fluctuations to ensure they remain favorable for both domestic industries and export activities.

Determinants of Export Performance in Uganda (1989-2020)

The study is set to investigate the factors determining export performance in Uganda. The specific objectives of the study are to examine the relationship between Foreign Direct Investment net inflows, inflation, Real Exchange Rate and export performance from 1989 to 2020. The study adopted a longitudinal design and the analysis was based on stationarity tests, co-integration tests, ordinary least squares tests and finally diagnostic tests. The study results show that there is a significant relationship between foreign direct investments and export performance. Secondly, it was found that there was a relationship between inflation and export performance. The study also observed a significant relationship between inflation and export performance. Finally, it was found that the real exchange rate affects export performance. The study concludes that the development of foreign direct investments induces export performance; hence export performance can be generated through foreign direct investments. The study also concludes that the state of inflation reduction can be a general development of the export performance for the countries, while the real exchange rate is a key determinant for the export performance in Uganda from 1989 to 2020. The study recommends that there is a need for regulations and monitoring to ensure the proper form of foreign businesses in the country together with enhancing the management situation for the management of the business. Secondly, the policies intended to reduce inflation are needed to increase the capacity of businesses to operate and attain mechanisms for the reduction of inflation. Finally, the government should also embark on strong fiscal policy to reduce unnecessary money supply which can lead to inflation that negatively impacts on economy & reduces economic growth.

Effect of FDI Net Inflow on the GDP growth rate: 1990-2021

Purpose: This study examines the impact of foreign direct investment (FDI) on the gross domestic product (GDP) growth rate in Nigeria from 1990 to 2021. Research methodology: This study employed time-series data from the World Bank’s World Development Indicator Database to ensure data homogeneity. The data were assessed for stationarity using the ADF unit root test. All the data were stationary after the first difference. The hypothesis was tested using ordinary least squares (OLS) with BLUE properties. Results: The study finds a significant positive effect of foreign direct investment net inflow on GDPGR (p<.05). The control variables DEGO (p=0.3299) and INFL (p=0.3321) showed positive coefficients but were non-significant. Limitations: The study used only data from the Nigerian context, from 1990 to 2021, which affects the generalizability of the study findings to other countries in SSA, and a limited number of control variables, such as DEGO and INFL. Contribution: This study contributes to the literature on FDI’s impact of FDI on the economic growth of African nations. The research findings have critical policy implications for governments aiming to achieve sustainable economic growth. Practical Implications: This study has policy implications for developmental governance in Nigeria and SSA countries. Novelty: This study deviates from prior studies that agree that illicit financial flows in the form of FDI outflows negatively affect growth and focus on FDI net inflows’ beneficial impacts on the Nigerian economy.

Impact of Foreign Direct Investment (FDI) on Unemployment in Somalia

This study evaluates the impact of foreign direct investment (FDI) on unemployment in Somalia. To achieve this goal, a co-integration analysis of the Johansen and VAR models was conducted using annual data from 1991 to 2021. The results indicate that there is no significant long-term relationship between foreign direct investment net inflows and unemployment. Furthermore, the long-term and short-term effects of FDI on unemployment are not significant. Based on the findings, it can be concluded that FDI does not contribute to a reduction in the unemployment rate in Somalia. Therefore, governments in the region should aim to attract labor-absorbing FDI and channel foreign investment inflows towards labor-intensive sectors with high labor-absorptive capacity, such as horticulture and floriculture.

Some Recent Trends and Implications of Foreign Direct Investment in Bangladesh

ABSTRACT: This study was carried out to evaluate the recent trends and implications of foreign direct investment (FDI) in Bangladesh. Due to its cost-effective workforce, potential market, rapidly growing economy, advantageous geographical location, and other pertinent factors Bangladesh has become one of the most enticing developing countries for foreign direct investment (FDI). Both quantitative and qualitative analyses were used. The trends and implication of FDI was assessed through different variables such as Net FDI inflow in Bangladesh, FDI inflows as percentage of GDP of Bangladesh, sectoral FDI inflow in Bangladesh, net FDI inflows from top 10 countries and by sectors, net FDI flow by EPZ and non-EPZ areas, no. of employment by FDI, FDI inflow by components, GDP, export, import, balance of payment, foreign exchange rate, inflation and corporate tax rate, which were then analyzed using different statistical measures, such as growth percentage, trend equations, the square of the correlation coefficient and correlation matrix. Thirteen trend equations and R-squared were tested for different relevant variables of FDI. To estimate the implication of FDI in Bangladesh, seven hypotheses has also been tested. Among them, the trend values were positive for eleven variables. The square of correlation coefficient (R-squared) of most of the equations is more than 0.7, indicating well fitted trend equations. According to the results of this analysis, FDI has positive correlation between GDP growth, exports, imports, employment in EPZs, and exchange rates. However, there is a significant negative correlation between corporate tax rate and inflation rate. By introducing beneficial FDI policies, providing substantial investment incentives, streamlining pertinent regulations, minimizing bureaucratic procedures, and through better infrastructure Bangladesh must act swiftly to entice more foreign investors. Despite adopting lenient FDI regulations, the government musthave to ensure facilities like more export processing zones, easy access to IT facilities, maintaining stable foreign exchange rates, encourage FDI from leading nations, an attracting new foreign investment source. By implementing these policies into practice, Bangladesh can boost up economic growth and may attract more FDI. This study proves that there is room for FDI to increase in the future and supporting economic growth of Bangladesh.

Analysis of Foreign Direct Investment Net Inflows in the Philippines: Trends, Predictors, and Forecasting Using Time Series and Linear Regression Models

Analysis of Foreign Direct Investment Net Inflows in the Philippines: Trends, Predictors, and Forecasting Using Time Series and Linear Regression Models

Threshold result of FDI on Economic growth: case in Georgia

In today's world of increasing globalization and economic openness, foreign direct investment (FDI) is a critical factor that contributes to the dependency of economies. The volume of the global flows of foreign direct investment (FDI) has grown significantly during the last two decades. The data of variables used in this research are included from 2001 to 2021.Most of data for variables before 2001 are not available. The variables are as follows. The ratio of net FDI inflows to GDP is known as FDI. The United Nations Conference on Trade and Development (UNCTAD) Statistics are used to calculate net FDI inflows. Data for variables are derived from the World Bank databank's World Development Indicators (WDI).Threshold regression model is utilized in the research.

Nexus between Pakistani Firm's Profitability and Foreign Direct Investment

Globalization and Foreign Direct Investment (FDI) have a very strong association. FDI increases competition, externalities, domestic firm profitability, technology transfer, knowledge transfer, manpower training, market networking, and economic benefits. This study examined how foreign direct investment affects Pakistani banks' profits. The analysis used 1996–2015 time series data. EViews estimated the research model. The study uses the autoregressive model for finding any association between the response variable, profitability of domestic companies, and the net FDI inflows (percentage of GDP), FDI (foreign direct investment), and four response variable lags. Return on Assets (ROA) quantified domestic firm profitability. The model indicated and the coefficient showed that ROA and FDI and FDI per capita have a positive significant association, but ROA and ROA (-4) in the host country have a negative significant link. Pakistani firms will profit more as FDI increases.

The contribution of cross-border capital flow towards decarbonisation

This study examines the effects of greenfield foreign direct investment, mergers and acquisitions, and net foreign direct investment inflows, on carbon dioxide emissions in 68 countries from 1996 to 2018. The investigation adopts an augmented Stochastic Impacts by Regression on the Population, Affluence, and Technology (STIRPAT) framework and employs an instrumental variable approach and instrumental variable-quantile regression models for the sampled nations. Whilst several Foreign Direct Investment entry modes are shown to have varying effects, the results demonstrate that capital inflows via greenfield foreign direct investment and net foreign direct investment raise emissions in all nations, confirming the Pollution Haven Hypothesis. Also, the unrestricted inflows of capital via greenfield projects could increase environmental degradation overtime and the detrimental impact could spread to other sectors of the economy. Moreover, our study demonstrates that capital inflow through cross-border mergers and acquisitions is a significant contributor to decarbonisation throughout the analysed nations, confirming the halo hypothesis, with quantile results revealing diverse effects across national emission profiles. The results are robust to different model specifications of the independent variables and estimation methods. Based on the empirical findings, several policy implications are suggested for theory and practice on cleaner production and sustainability in the countries and multinational companies. This study recommends policy measures to regulate the inflow of polluting assets and incentives to contribute to decarbonisation solutions.

The Effect of Economic Policy Uncertainty on Foreign Direct Investment in the Era of Global Value Chain: Evidence from the Asian Countries

The global value chain has promoted foreign direct investments in emerging markets. Not only resources but also public policies can affect the inflows or outflows of foreign direct investments (FDI). This study investigates the effect of economic policy uncertainty on net foreign direct investment inflows in 48 Asian countries. We use the panel dataset from different sources from 1995 to 2020. Our core dependent variable is net foreign direct investment inflows, and the explanatory variable is economic policy uncertainty. The study’s control variables include trade, GDP per capita, GDP growth, population, financial development, inflation, and employment. We use the generalized system method of moment (SYS_GMM). Furthermore, the robustness of our empirical results is checked by using the different proxy variables of policy uncertainty. Our results confirm the negative effect of policy uncertainty on foreign direct investment inflows in 48 Asian countries. Our results show that foreign investment inflows are more sensitive than domestic investment. The influence of domestic and global uncertainty on inward FDI is greater than domestic investment. Furthermore, the interaction effect of financial development (FD) shows that FD does not affect mitigation of the negative impact of global economic policy uncertainty on foreign investment inflow. In contrast, FD mitigates the adverse effects of domestic policy uncertainty on foreign and domestic investment. The findings imply that policies need to be attractive, effective, and transparent to woo FDI to the emerging markets.

The non-linearity between financial development and carbon footprints: the environmental roles of technological innovation, renewable energy, and foreign direct investment

The economies of the majority of the South Asian countries have substantially expanded in the last couple of decades. Nevertheless, the simultaneous deterioration in environmental quality questions the quality of such growth performances of the South Asian countries in light of their environmental sustainability objectives. As a result, limiting the environmental hardships faced by these countries is deemed as an important agenda of the concerned governments. Therefore, this study aims to examine the determinants of carbon footprints in selected South Asian countries using advanced panel data econometric methods. Overall, the findings confirm an inverted U-shaped association between financial development and carbon footprints based on which the environmental Kuznets curve hypothesis is verified in the long run. Besides, technological innovation is evidenced to curb the short- and long run levels of carbon footprints while renewable energy transition exerts carbon footprint-inhibiting impact only in the long run. Further, the findings verify the pollution haven hypothesis by confirming carbon footprint-boosting impact of net foreign direct investment inflows. Consequently, for improving environmental quality, South Asian economies should develop their financial sectors further, discover green technologies, undergo renewable energy transition, and restrict inflows of unclean foreign direct investments.

Causal association of entrepreneurship ecosystem and financial inclusion

Economic development fosters a favorable ecosystem for entrepreneurs. Economic development and entrepreneurship ecosystem have positive causality with each other. Subsequently, economic development is also a useful determinant of the entrepreneurship ecosystem and vice-versa. The entrepreneurship ecosystem cannot be nurtured without financial development. However, limited studies have observed the causal association between an entrepreneurship ecosystem and financial inclusion. As financial development has a vital contribution to increasing the entrepreneurship ecosystem, this study examines the cause-and-effect relationship between entrepreneurship ecosystem and financial inclusion across countries. The regression coefficients of selected independent variables are estimated through robust empirical models. For said investigation, the global financial inclusion index and global entrepreneurship ecosystem index score were used as proxy variables for financial inclusion and entrepreneurship ecosystem, respectively in regression analysis. The empirical findings revealed that financial inclusion can be improved with an increase in entrepreneurship ecosystem, economic development, ease of doing business, employers, foreign direct investment net inflow, use of internet facilities, and wage and salaried workers. In the same way, entrepreneurship ecosystem can also be nurtured with financial inclusion, economic development, trade openness, ease of doing business, total employers, use of internet facilities and wage and salaried workers increase. The empirical results also inferred that entrepreneurship ecosystem, gross domestic per capita, foreign direct investment net inflow, ease of doing business, employer's start-up procedures to register a business and wages and salaries are important indicators to expand financial inclusion. Further, the results claimed that entrepreneurship ecosystem and financial inclusion are complementary to each other.

The effect of population health on the inflows of foreign direct investment in Africa

Although a lot of studies exist on the drivers of Foreign Direct Investment (FDI) inflows, very little attention has been paid to the effect of population health, to the extent that, some countries may be willing to compromise their health and safety standards in order to attract FDI inflows. In this study, we provide empirical evidence of the effect of population health on net FDI inflows in Africa. The study employs data from 1997 to 2017 on a sample of 35 African countries. Life expectancy and death rate are used to proxy population health whiles the Instrumental Variable Fixed Effects (IVFE) and the system Generalised Method of Moments (GMM) regressions are used as the baseline and robustness empirical estimation techniques, respectively. The study finds life expectancy and death rate to have positive and negative significant effects on net FDI inflows respectively, irrespective of the estimation technique used. Our findings imply that, instead of lowering health and safety standards, enhancing population health (via for instance, improving access to quality healthcare, improved water and sanitation as well as vaccination against diseases among others) should rather be used as a strategy towards attaining higher net FDI inflows, especially into Africa.

Does trade openness improve the quality of domestic institutions? Evidence from Africa

Research background: The research article deals with impacts of international trade openness on institutions in less developed economies, namely in Africa. Purpose of the article: It investigates the impacts of international trade openness on institutional quality in Africa measured by twelve various variables. Methods: It applies generalized methods of moments to a dynamic panel data of 34 African countries in the period of 1988?2012. Institutional quality data come from International Country Risk Guide, the rest from World Development Indicators and UNESCO databases. Findings & value added: Our results indicate that in the case of Africa, trade openness seems to be a positive and significant determinant of institutional quality, however, it differs across various institutional variables. Trade openness brings a positive impact on government stability, bureaucracy and law and order, we also identify its conflict-mitigating effects. This happens, unfortunately, with an exemption for natural resources exports. Trade openness also positively influences security and socioeconomic conditions, although we find the link much weaker. Regarding our control variables, we find two interesting results. First, GDP per capita has a strong and positive association with institutional quality when measured by one bundled indicator, however, individual variables show different intensities. Second, we find a strong and positive association of net foreign direct investment inflows and government stability. The added value of this research lies not only in focus on the less researched relationship, i.e., how trade impacts the institutional quality, but dominantly in focus on many institutional variables at once and comparison of their effects. Other empirical studies usually focus on selected variables only, or on selected trade items (natural resources).

The impact of technology frontier on the total factor productivity growth in African economies: the role of human capital

This paper examines the impact of the technology frontier on the Total Factor Productivity (TFP) growth in African countries. The paper includes the human capital channel (i.e., low and high education) in the TFP growth function. The model also adds net foreign direct investment inflows and financial development as control variables. The long-run estimations indicate that the technology frontier hampers the TFP growth. The technology frontier adversely affects the TFP growth in a low education channel. Surprisingly, high education has a positive and insignificant impact on TFP growth. It is also found that financial development decreases the TFP growth while net foreign direct investment inflows have mixed effects. These findings suggest that educated labour embodied in rich technology frontier should also require the proper training for enhancing the TFP growth in African economies.

IFRS adoption and the impact on foreign direct investment – evidence from Central and Eastern European countries

Abstract The adoption of International Financial Reporting Standards (IFRS) is supposed to improve transparency by increasing the quality and the comparability of financial information. Qualitative financial information plays an important role in describing the position of a company and its financial performance, which are relevant to the investors in the decision-making process. At European level, the appearance of Regulation no.1606/2002 stimulated the implementation process by requiring to each listed company from European capital markets to prepare consolidated financial statements in accordance with IFRS for each fiscal year beginning with 1st January 2005. The main purpose of this research is to investigate the link between foreign direct investment (FDI) in 4 countries from Central and Eastern Europe and the IFRS adoption. The FDI inflows are a key factor in the economic development of a country due to their long term commitment in the business of the host country. In the present study, net inflows of FDI were analyzed in the period of 1990-2020 based on the data collected from the World Bank website. Even if we cannot draw a direct line between IFRS implementation and the increase of FDI, we cannot fail to notice that in the years when there have been changes in the legislation on convergence to IFRS there have been significant increases in the attracted FDI.