Foreign Direct Investment Growth Research Articles

The Role of Financial Development and Capital Formation in Promoting Renewable Energy in Bangladesh

Bangladesh, rich in various resources, stands at a pivotal point where the sustainable use of renewable energy can be significantly increased. This study focuses on analyzing the impact of financial development (FD), foreign direct investment (FDI), economic growth, carbon dioxide emissions, and capital formation on renewable energy consumption in Bangladesh. Using time series data from 1991 to 2020 and employing the ARDL bounds testing approach to cointegration, the study provides a comprehensive analysis of these factors. The results reveal a long-term positive relationship between financial development and capital formation with renewable energy consumption, while FDI and economic growth do not significantly influence renewable energy use in the long run. Conversely, carbon dioxide emissions negatively impact renewable energy consumption in both the short and long term. The short-term analysis further indicates a negative relationship between capital formation, FDI, and renewable energy consumption, but financial development shows a positive and significant impact. These findings emphasize the need to enhance our understanding of the role of capital formation and financial development in promoting renewable energy, not just in Bangladesh but also in other developing and developed nations. To curb environmental damage and increase the use of renewable energy, eliminating fossil fuel subsidies and introducing a carbon tax on non-renewable energy use is crucial. Furthermore, Bangladeshi policymakers should advocate for green financing and allocate more funds to clean renewable energy projects, laying the groundwork for a robust renewable energy economy. Received: 3 August 2024 / Accepted: 11 November 2024 / Published: 20 November 2024

THE MEDIATION EFFECTS OF FDI ON TRANSPORTATION INFRASTRUCTURE AND ECONOMIC GROWTH IN LAO PEOPLE’S DEMOCRATIC REPUBLIC

This paper aims to study the mediation effects of Foreign direct investment (FDI) on the relationship between transportation infrastructure and economic growth in Lao people’s Democratic Republic (Lao PDR) by using Sobel test. This study is quantitative research using panel data from 2013 to 2022. The regression results conclude that there is a positive relationship between transportation infrastructure and FDI by p-value=0.01. In addition, there is a positive relationship between FDI and Economic growth by significance at 0.05. Result demonstrates that there is direct effect and indirect effect between transportation infrastructure and Economic growth and Sobel test found that FDI was a partial mediator of the relationship between transportation infrastructure and Economic growth as well. In summary, transportation infrastructure enhances the attractiveness and efficiency of a region, drawing in FDI. The resultant FDI brings in capital, technology, and expertise, stimulating economic activities and contributing to overall economic growth. This mediating role of FDI underscores the interconnectedness of transportation infrastructure development, investment attraction, and economic growth.

Foreign direct investment inflow and the economic growth nexus in Tanzania

PurposeA shortage of investment capital is one of the main issues facing most developing economies, including Tanzania. Policymakers, economists, and governments in these countries have been debating how to overcome this obstacle and improve economic growth through foreign direct investments (FDI). The present study endeavors to examine the relationship between FDI and economic growth in Tanzania during the period of 1991–2021. The analysis considers financial development, capital formation, and labor force involvement as intermediation variables.Design/methodology/approachThe study uses time series data to estimate an autoregressive distributed lag (ARDL) model, as well as Granger causality tests to investigate the relationship between the variables under study.FindingsThe findings show a long-run co-integration between the studied variables. However, only FDI and labor input have a significant impact on gross domestic product (GDP) growth in both the short and long run. Bidirectional causality exists between FDI, labor input, and GDP growth in the short and long run.Practical implicationsThis study contributes to an understanding of the relationship between inbound FDI, labor input, and economic growth in Tanzania, as well as updating the government to improve its financial system to gain more from FDI inflows and hence boost growth-enhancing effects.Originality/valueThis study provides insight into the relationship between inbound FDI and economic growth in Tanzania, which is a critical policy concern in developing economies. Extant studies’ results remain controversial, and this is the first study in Tanzania to investigate the FDI-growth nexus, by considering financial development, capital formation, and labor input simultaneously.

FDI Impact on China's Sectoral Performance: A Panel Cointegration and Causality Analysis

This study provides a thorough examine the influence of FDI inflows and outflows on China's economic growth across three major sectors. Using panel data from 1997 to 2022 in China, it utilizes tests for unit roots and cointegration to investigate the enduring connection between FDI and economic growth. The research results validate the existence of a long-standing cointegration relationship between FDI and economic expansion. Additionally, this research employs the Granger causality test to ascertain the direction of causality between FDI and economic growth. The study reveals a two-way causality between foreign direct investment (FDI) inflows and overall economic growth, which supports the hypothesis of feedback causality. Additionally, there exists a one-way causality originating from FDI inflows across various sectors, suggesting that growth attracts FDI. The government should encourage foreign investment to enhance the industrial structure and boost economic growth.

THE EFFECT OF FOREIGN AND DOMESTIC INVESTMENT ON ECONOMIC GROWTH WITH THE UNEMPLOYMENT RATE AS AN INTERVENING VARIABLE

This research aims to analyze the influence of Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) on economic growth through the open unemployment rate (OUR) as an intervening variable. The research object covers Balikpapan City from 2010 to 2023. A quantitative research method is used together with the path analysis technique. The research results indicate that partially, FDI does not significantly affect the unemployment rate but has a negative and significant influence on economic growth. DDI has a negative and significant effect on the unemployment rate and a significant positive effect on economic growth. The unemployment rate has a negative and significant effect on economic growth. Based on path analysis results, the unemployment rate only successfully mediates significant influence between FDI and economic growth, but in the relationship between DDI and economic growth, it fails to mediate

Effects of FDI on the Growth of Agricultural Sector in Côte d'Ivoire: An Empirical Analysis Based on Toda-Yamamoto Causality Tests and ARDL Cointegration

This paper analyses the contribution of Foreign Direct Investment (FDI) to agricultural growth in Côte d'Ivoire over the period 1980-2021. The data come from World Development Indicators WDI (World Bank). The Toda-Yamamoto causality test and the ARDL cointegration approach are used. The results of the Toda-Yamamoto test show no causal link between FDI and agricultural growth, while those of the ARDL approach indicate that FDI has a negative impact on agricultural growth. There are several reasons for these results: insufficient resources allocated to the agricultural sector and the predominance of FDI in other sectors of activity in Côte d'Ivoire. Our results also show the role that the State must play in building infrastructure and increasing foreign trade.

THE RELATIONSHIP BETWEEN FDI AND ECONOMIC GROWTH IN INDIA. A TIME SERIES APPROACH

Foreign Direct Investment (FDI) has gained importance after the second world war. In broader sense Foreign Direct Investment incorporates the establishment of up to date and advanced facilities, mergers and acquisitions, investing the profits earned from other overseas business activities, providing loans to other companies etc. In narrow sense the Foreign Direct Investment means investment in the country other than the investors own country. FDI can be better understood by studying the real reason that why the companies have shown interest in investing abroad rather than exporting and outsourcing their products to domestic firms. In due course of time many theories and approaches were developed to explain FDI. Although several researchers have tried to explain the phenomenon of FDI, we cannot say there is a generally accepted theory, every new evidence added some new elements and criticism to the previous ones. FDI in India is playing a noticeable role in the growth and development of the country. India is one of the important countries of the world which is able to receive substantial amount of FDI. The present study has made an effort to see the relationship between the FDI and Economic growth in India. GDP has proxies for economic growth. First the Johansen cointegration test result shows the long run relationship between variables and the Granger causality test result exhibits that there is unidirectional Granger causality between FDI and GDP. Next the Multiple Regression model result presents that the estimated coefficients on FDI & exports have a positive relationship with GDP. Therefore, it is statistically revealed that FDI and Exports are instrumental in influencing the level of economic growth in India. India is having certain drawbacks like Weak infrastructure, Complicated tax structure, Restrictive labor laws, Bureaucracy and Corruption. Unless and until these challenges are met with, India will never compete with China regarding FDI inflows. KEYWORDS: Foreign Direct Investment, Gross Domestic Product, Economic Growth.

Exploring the Nexus Between Foreign Direct Investment Inflows and Economic Growth: A Robust Empirical Analysis of European Low- and Middle-Income Countries

Understanding the relationship between foreign direct investment (FDI) inflows and economic growth is essential for enhancing output, introducing new technologies, and developing managerial capabilities. The study addresses a gap in the literature regarding FDI and economic growth in low- and middle-income European countries from 1995 to 2022. Employing various econometric methods, including Dynamic GMM, Hausman-Taylor IVs, Fixed Effects, Pooled OLS, and Random Effects, the analysis reveals a negative relationship between economic growth and FDI inflows. The finding suggests that FDI does not necessarily lead to improved economic performance. Additionally, trade openness negatively impacts FDI levels, while increased R&D and inflation positively influence these dynamics. The effects of tertiary education, ease of doing business, and corruption control are mixed, with strong rule of law being a significant attractor for FDI. These insights provide valuable guidance for policymakers in low- and middle-income European countries aiming to formulate effective strategies for attracting foreign investments and fostering economic growth.

Regional Trade and Financial Mobilisation as Preconditions for Economic Growth: The Case of ECOWAS

This empirical study delves into the Economic Community of West African States (ECOWAS) and its impact on economic growth through regional trade and financial mobilisation amongst its 15 member states. Through examination of data from 2005 to 2022, the study took into consideration a blend of static and dynamic panel data econometrics to explore nuances of trade openness, foreign direct investment (FDI), Domestic Credit to the Private Sector (CPS), and other factors influencing Real Gross Domestic Product (RGDP). The findings highlight a positive relationship between trade openness, FDI and economic growth, emphasising the importance of regional trade integration and foreign investment in driving economic development. Conversely, domestic credit shows a negative association with economic growth, thereby indicating the need for cautious assessment of credit allocation and financial sector efficiency. The study also reveals the important role of institutional quality in fostering economic growth, thereby recommending for policy reforms that strengthen governance frameworks and promote institutional resilience. Astonishingly, the analysis shows no significant relationship between inflation, transportation infrastructure, and economic growth. Theses insights contribute to a clear understanding of the dynamics between regional trade, financial mobilisation, and economic development within ECOWAS, thereby offering valuable implications for policymakers, with the aim of enhancing economic growth and integration in the region.

Investigating the links between civil war, peace and foreign direct investment: a case study of Sri Lanka’s tourism sector

ABSTRACT It is often assumed that civil wars impede foreign direct investment (FDI). Peace is therefore typically considered important for countries to attract FDI. However, scholarly evidence is inconsistent and has uncovered a complicated relationship between conflict and FDI. While studies have tended to focus on the extractive industries, this article investigates how conflict and peace can impact FDI in the tourism industry. Using Sri Lanka as a case study, the evidence suggests that the country’s civil war (1983–2009) inhibited inward flows of tourism FDI. Since the conflict ended, the tourism sector and tourism FDI rapidly expanded. However, the areas most affected by the conflict have seen limited growth in tourism and tourism FDI. High levels of militarisation – including military involvement in tourism – have stymied tourism in these areas. This suggests a more complicated relationship between FDI, civil war and peace than is typically recognised in the current scholarship.

Economic growth and foreign direct investment in Balkans

Foreign direct investment (FDI) has become a key source of economic growth for the Balkan countries, offering vital funding for development initiatives. Therefore, the purpose of this study was to examine the dynamics of FDI in Serbia, North Macedonia and Montenegro from 2000 to 2023. An econometric model was used to conduct the research, namely, the relationship between FDI and economic growth in the region was analysed. A multiple regression model was developed that includes gross domestic product growth as the dependent variable. It was established that significant fluctuations in the rates of economic growth are characteristic of all three countries during this period. Serbia has shown particular resilience, with positive growth rates prevailing in most years. Key sectors attracting FDI were also identified, including services, manufacturing, automotive, IT, agriculture, energy and tourism. The obtained results emphasised the importance of reforms aimed at business development, infrastructure development and regional integration, especially with the EU, as critical factors in attracting FDI. In addition, diversification of FDI sources was emphasised with increased investments from China, Turkey and the United Arab Emirates, which complement traditional investors from the EU. More than 60% of foreign investment in Serbia has been found to be concentrated in the services sector, while North Macedonia has successfully attracted investment in high value-added industries such as information technology and engineering. These findings are consistent with established economic theories about the impact of FDI on growth, while providing specific insights into the Balkan context. It found that a 1% increase in FDI was associated with a 0.3-0.5% increase in gross domestic product in the Balkan countries studied. The obtained results can become the basis for future political decisions and investment strategies in the region

Modelling The Role of Institutional Change In A Tourism Growth Model: A Dynamic Analysis

This study aims to investigate the dynamic relationships among foreign direct investment (FDI), financial development, tourism development, and institutional quality in selected MENA countries. The research focuses on assessing the significance of institutional quality within these interlinked dynamics and its impact on the variables under consideration. The study's objective aligns with UNSDG Goal 16, which aims to promote peaceful and inclusive societies with strong institutions that support economic growth and development. The study employs a novel panel Autoregressive Distributed Lag (ARDL) estimation approach to analyze empirical data from 2002 to 2018. This method allows for a comprehensive examination of both short-run and long-run interactions among FDI inflows, financial development, tourism development, and institutional quality across multiple countries in the MENA region. The empirical results indicate that, in the long run, institutional quality negatively influences FDI inflows, financial development, and international tourist arrivals, while it positively impacts real GDP. In the short run, financial development was found to negatively affect real GDP, and international tourist arrivals were observed to negatively impact financial development. Additionally, institutional quality exhibited a negative effect on international tourist arrivals in the short run. Country-wise regression results showed that institutional quality positively influenced international tourist arrivals, FDI inflows, real GDP, and financial development. Furthermore, the study identifies significant unidirectional causal relationships, highlighting the pivotal role of institutional quality in economic growth and development. The study concludes that institutional quality plays a critical role in shaping the dynamics of FDI, financial development, and tourism growth. While institutional quality has a positive impact on long-term economic growth, its negative effects on FDI, financial development, and tourism in the short run suggest the need for improved governance and policy interventions.

The threshold analysis of the Official Development Assistance (ODA), Foreign Direct Investment (FDI), and economic growth in selected African countries

There is a scarcity of research on the analysis of thresholds of official development assistance (ODA), foreign direct investment (FDI), and economic growth in Africa. Most of the studies focused on analysing the correlation between official development assistance (ODA) or foreign direct investment (FDI) and economic growth. This study stands out from others by adopting a comprehensive approach to analyse the threshold analysis of ODA, FDI, and economic growth in many countries on a continental scale. We examine the threshold for ODA, FDI, and economic growth by analysing annual data from 1980 to 2018 in 30 African countries. The primary method used for the estimation was the panel threshold regression approach. The threshold analysis test assessed the impact of ODA, FDI, and economic growth. The current study utilised threshold analysis and found a positive coefficient of 0.0620, indicating a favourable correlation between FDI and economic growth. On the contrary, the negative coefficient of 0.0683 shows a detrimental correlation between ODA and economic growth. Therefore, officials must enforce the level of ODA that is necessary to stimulate FDI and foster economic growth in Africa. Furthermore, it is crucial for authorities to implement a monitoring system to closely monitor these thresholds and adjust the policy accordingly in response to changing economic situations. The findings of this study will not only contribute to academic discourse, but will also provide vital perspectives for politicians, practitioners, enterprises, and foreign investors on how to effectively implement policies that stimulate economic growth and attract foreign investment in Africa. Furthermore, this study offers recommendations for further research in the domain of international capital flows.

The Dual Impact of Foreign Capital: A Comprehensive Analysis of the Interplay between Foreign Direct Investment and Development Assistance Committee Initiatives in Ethiopia

This study delves into the intricate dynamics of Ethiopia's economic landscape, examining the dual impact of foreign capital through a comprehensive analysis of Foreign Direct Investment (FDI) and Development Assistance Committee (DAC) initiatives. Over the period 1992-2012, a two-part empirical approach is employed, encompassing descriptive statistics and rigorous econometric modeling rooted in time series analysis. The nuanced relationship between foreign capital and economic growth in Ethiopia is unraveled, addressing challenges such as job displacement and potential exploitation, alongside positive outcomes like infrastructure development and increased service accessibility. The econometric analysis utilizes various models to explore the causal relationships between FDI, DAC, economic growth, and self-employment. Sensitivity analysis ensures the robustness of the models by unraveling multicollinearity, while stationarity tests guide appropriate treatment of non-stationary variables. Cointegration tests reveal potential long-term relationships among variables, with specific models suggesting cointegration, further substantiating the intertwined nature of FDI, DAC, and economic growth. Granger causality Wald tests scrutinize short-run equilibrium relationships, unveiling intriguing insights into the direct and indirect effects of FDI, DAC, and self-employment on economic growth. Robust diagnostic tests affirm the reliability of the models, indicating compliance with Ordinary Least Squares (OLS) conditions. In summary, our findings illuminate the dual impact of foreign capital on Ethiopia's economic trajectory, offering nuanced perspectives for policymakers. The study's comprehensive empirical foundation facilitates a deeper understanding of the complex interplay between FDI, DAC initiatives, and economic growth, paving the way for informed decision-making and future research endeavors.

The Impact Analysis of the Relationship Between Foreign Aid and Economic Development in Nigeria

This study examines the impacts of foreign direct investment (FDI) as a proxy for Foreign Aid, alongside other critical economic and political variables, on Nigeria's economic development. Utilizing an Ordinary Least Squares (OLS) regression model from 1981 to 2022, it explores the dynamics between FDI, trade openness, unemployment rate, corruption index, inflation rate, political stability, and population growth rate in shaping Nigeria's economic growth trajectory. The findings reveal that FDI significantly contributes to economic development, while trade openness highlights the importance of a conducive external economic environment. Conversely, the adverse effects of inflation and corruption highlight critical challenges that undermine the potential benefits of foreign aid and investment. This study highlights the complex relationship between foreign aid, economic policies, and institutional frameworks. It emphasizes Nigeria's need to bolster governance and macroeconomic stability to optimize the developmental impacts of foreign aid. Through empirical analysis, this research contributes to the discourse on development economics, offering professional insights into the conditions under which foreign aid can effectively foster sustainable economic growth in Nigeria.

China’s foreign direct investment: driving green growth or seeking pollution havens? Based on the perspective of green total factor productivity

China has significantly increased its foreign direct investment (FDI). Although these investments help to boost global development, their impacts on the environment are still controversial and deserve careful investigation. This paper uses the super-efficiency SBM model to measure the green total factor productivity (GTFP) of 123 host countries of China’s FDI. On this basis, we adopt the two-step system GMM and dynamic panel threshold effect model to analyze the impact of China’s FDI on the GTFP of host countries. The research results show that: 1) The impact of China’s FDI on the GTFP of host countries is mainly through green technology efficiency. Its impact is inhibitory, followed by a promotional one, with the latter being significantly larger than the former. 2) There is no evidence of the “pollution haven effect” associated with China’s FDI. In fact, for countries with lower environmental regulations, China’s FDI promotes the growth of GTFP more effectively. 3) The innovation level of host countries moderates the relationship between China’s FDI and GTFP growth. For host countries with stronger innovation level, their GTFP growth can be enhanced to a greater extent by China’s FDI.

Analysis of Economic Freedom, Foreign Direct Investment, and Economic Growth

This research analyzes the relationship between economic freedom, foreign direct investment (FDI), and economic growth using the Vector Error Correction (VECM) model and the Granger causality test. Panel data from several free trade agreement countries in the Regional Comprehensive Economic Partnership (RPEC) for 1997 – 2022. VECM captures cointegration relationships and models short-term adjustments toward long-term balance. Meanwhile, the Granger causality test helps identify the direction of the causal relationship between economic freedom, FDI, and economic growth. Empirical results show a long-term but weak cointegration relationship between these variables in the short term. In addition, it was found that there is a two-way causality between economic freedom and economic growth, as well as between FDI and economic growth. These findings imply that policies encouraging economic freedom and attracting foreign investment can increase a country's economic growth. This research provides empirical insights into the important role of economic freedom and FDI in driving economic growth and related policy implications for creating an environment conducive to investment and sustainable economic growth.

The impact of foreign direct investment on economic growth in Oman: An analysis via SmartPLS approach

Foreign Direct Investment (FDI) has grown rapidly around the world. This is because many nations, particularly developing ones, consider Foreign Direct Investment as a vital component of their economic growth plans. This research investigates the relationship between FDI and economic growth in Oman. This is descriptive research that employs quantitative methodologies, with quantitative data gathered through secondary sources. Economic growth is the dependent variable in this study. The factors influencing foreign direct investment are often known as independent variables. In addition, this study used the net inflow and net outflow % of GDP to measure foreign direct investment and GDP growth annual % for measure economic growth. Where the real data was used, annual reports from "The World Bank" for the years 1974 to 2019. In addition, the data in this study was evaluated utilizing a Partial Least Square (PLS) technique and Structural Equation Modeling (SEM). This study discovered a positive association between FDI and economic growth in Oman. Furthermore, the findings suggested that FDI had an impact on economic growth. Foreign direct investment has a substantial impact on economic growth (GDP-Growth). However, the finding showed that FDI-Net-Inflows were insignificant in terms of GDP-Growth.

Do women in politics and government efficiency enhance electricity access in Nigeria: analyzing energy prices and foreign investment

ABSTRACT Access to reliable, affordable, sustainable, and modern energy, along with the empowerment and increased participation of women in decision-making and politics, are fundamental to achieving the Sustainable Development Goals (SDGs) set forth by the United Nations (UN). The UN accentuates the critical role of women in politics for the successful attainment of the SDGs. This study delves into this aspect by investigating the impact of female political representation on access to electricity. Additionally, the study examines the influence of government efficiency, foreign direct investment (FDI) inflows, urbanization, and economic growth in Nigeria, utilizing data spanning from 2003Q1 to 2021Q4. Employing advanced econometric techniques such as wavelet quantile regression, wavelet quantile correlation, and quantile-on-quantile Granger causality analysis, our analysis reveals noteworthy insights. Our findings reveal a correlation between heightened female political representation and decreased access to electricity in Nigeria. Additionally, we note the beneficial impacts of foreign direct investment (FDI) inflows, economic growth, and governmental efficiency on the accessibility of electricity. Furthermore, our quantile-on-quantile Granger causality analysis highlights the predictive capabilities of female political representation, urbanization, FDI, and economic growth regarding electricity accessibility in Nigeria. Drawing from the insights gleaned in our study, we have crafted substantial policy recommendations designed to tackle the identified challenges and promote advancements in both electricity access and women’s political engagement.

Topical issues of the formation of an effective economic and social policy in Cambodia

Cambodia, currently classified as a lower-middle-income developing country, aspires to reach upper-middle-income status by 2030. To achieve this ambitious goal, the Cambodian government has embraced an open market economic system and prioritized attracting foreign investments as well as encouraging final consumption expenditure (FCE) and stimulating the level of industries, including construction. This study aims to find out the influences of the fluctuations of foreign direct investment (FDI), FCE, and industry (including construction) (IIC) on gross domestic product (GDP) growth in Cambodia and to identify the key factors that can increase FDI, FCE, and IIC growth. The study employs descriptive and correlational analysis, mainly focusing on statistical analyses by constructing an econometric model. The results indicate that Cambodia’s GDP is directly and positively impacted by the FDI, FCE, and IIC, according to the analysis of the specification of the econometric model using a linear mathematical equation. The study concludes that the Cambodian government’s attention to strategic policies and initiatives in promoting FDI, FCE, and IIC, ultimately leading to a higher overall economic growth rate, is crucial. Factors such as political stability and governance, regulation and legal framework, infrastructure, human capital development, market access, publicprivate partnership, fiscal policy, and social protection should be at the forefront of the Cambodian GDP development roadmap.