Foreign Direct Investment Growth Research Articles

Understanding Idiosyncratic Risk and Economic Growth in ASEAN

This study examines the relationship between idiosyncratic risks, foreign direct investment (FDI), and economic growth in ASEAN countries using data from 2013 to 2022. Idiosyncratic risks refer to specific assets or individual sectors, distinct from systemic or market-wide risk. This study aims to determine whether idiosyncratic risks affect the ASEAN region's FDI flows and economic growth. The study uses structural equation modeling (SEM) analysis to analyze the ASEAN Statistical Database data. Regression weights are used to evaluate the relationship between idiosyncratic risks, FDI, inflation, SDG availability, and economic growth. The results indicate that although there is no significant direct relationship between idiosyncratic risk and FDI inflows, there is a significant positive correlation between idiosyncratic risk and economic growth. These findings have implications for policymakers and investors seeking to promote sustainable economic development in ASEAN countries. Understanding the dynamics of specific risks can inform strategies to attract FDI and stimulate economic growth. This study contributes to the theoretical basis of risk management and economic development in emerging market economies such as those in the ASEAN region.

Non‐linear nexus of mineral rents, coal rents, foreign direct investment, and environmental sustainability: Importance of institutional quality in E‐7 nations

AbstractThis study investigates the impact of natural resources (NRs), economic growth (GDP), institutional quality, mining and coal rents, and foreign direct investment (FDI) on the environmental quality in the E‐7 countries (Brazil, China, India, Indonesia, Russia, Turkey, and Mexico) from 1990 to 2021. To do this, such advanced estimation methods are used as the method of moments quantile regression (MMQR), with the artificial neural network utilized for robustness checks. The initial diagnostic test results unveiled the presence of cross‐sectional dependence, slope heterogeneity, and long‐run cointegration. The MMQR analysis results indicate that coal and mineral rents escalate environmental pollution by reducing the load capacity factor (LCF) across all quantiles. The results further indicate that FDI and economic growth negatively affect while institutional quality (INS) significantly promotes the LCF in E‐7 countries. Moreover, INS significantly moderates the relationship between mineral resources and LCF, as well as coal resources and LCF. The robustness test also validates these findings. Based on these results, policy measures aimed at strengthening institutional quality, particularly within the NR sector, are crucial for mitigating the adverse impacts of coal and mineral extraction on LCF and promoting sustainable development in the E‐7 countries.

Foreign Direct Investment and Economic Development: An International Perspective

Abstract The present study examines the patterns of foreign direct investment (FDI) in Kazakhstan and draws comparisons with global trends. Based on statistical data spanning from 2000 to 2022, the study reveals that the growth of FDI in Kazakhstan has exhibited greater volatility and speed compared to developed nations. However, it is strongly associated with global FDI inflows and the growth of gross domestic product (GDP). This article aims to examine the patterns and determinants influencing FDI in Kazakhstan and to juxtapose these patterns with global trends. The main approach used in the study was systematic. The article’s contribution lies in its provision of novel insights into the dynamics of FDI in Kazakhstan and its correlation with economic growth. Furthermore, the article elucidates the various factors that contribute to the expansion of FDI in Kazakhstan, while also offering suggestions for the development of public policy in this domain. The article provides a comprehensive examination of FDI patterns in Kazakhstan, comparing them to global trends and identifying the factors that influence the dynamics of FDI. Furthermore, the article offers suggestions for expanding the economic base of Kazakhstan beyond its reliance on the oil and gas industry, enhancing focus on high-tech and innovative sectors, and enhancing the institutional framework.

Do FDI And Trade Openness Affect Economic Growth Differently Across Income Groups? Case Studies From Asian Countries

This study examines the nexus between foreign direct investment (FDI), trade openness (TRO) and economic growth for selected 11 high-income and 22 middle- and low-income Asian countries within a model using a more recent panel dataset over the period 2000–2021. The cointegration test has been applied in this study, which shows that whether there is a long-term interrelationship between FDI and economic growth, which we focus on in particular, and then the covariance matrix estimators that are developed by Driscoll and Kraay are used. Our findings indicate that there is a positive relationship between FDI and TRO, and economic growth for high-income countries, whereas the relationship between FDI and economic growth is negative for middle- and low-income countries. This study provides insights on why governments and policy makers in developing countries should focus on prioritizing domestic investment and production strategies for sustainable economic growth rather than simply emphasizing the attractiveness of FDI and the indispensability of import-oriented trade liberalization.

Assessing the Drivers of Economic Growth in Pakistan: A Time-Series Analysis of Foreign Direct Investment and Oil Price Effects

This research looks at the factors that drive Pakistan's economic growth, with a particular emphasis on the influence of foreign direct investment (FDI) and oil prices. Using data from 1998 to 2022, the study applies the Auto Regression Distributed Lag (ARDL) model to examine the link between FDI, oil prices, and economic growth. The empirical findings show that FDI has a beneficial impact on economic growth, highlighting its importance as a driver for economic development in Pakistan. In contrast, the study finds that rising oil prices harm economic growth, emphasizing the negative effects of oil price volatility. Considering these findings, the study underlines the need for policies that encourage FDI inflows and industrialization to drive economic growth. Furthermore, the study emphasizes the importance of government involvement to mitigate the negative effects of rising oil costs, since unchecked rises might stymie economic progress. Understanding the determinants of economic growth in Pakistan is critical for both policymakers and investors. FDI is critical for increasing productivity and creating jobs, yet oil price volatility can have a substantial influence on the country's macroeconomic stability and growth trajectory. Analyzing their effects gives useful insights for long-term economic growth initiatives. Overall, the study suggests a dual strategy for Pakistani policymakers: create a climate conducive to attracting FDI while taking steps to reduce the negative consequences of unpredictable oil prices. By prioritizing these policies, Pakistan may accelerate its economic growth and protect itself from foreign economic shocks.

The role of digitalization, infrastructure, and economic stability in tourism growth: A pathway towards smart tourism destinations

AbstractThis study shows the impact of information and communication technology (ICT), inflation, economic growth, foreign direct investment (FDI), infrastructural development, and financial development on the global tourism index across all income groups. We use a generalized method of moments technique, novel index of tourism, and ICT in 130 countries from 1995 to 2019. The empirical results infer an increase in tourism due to sustained growth in ICT (all panels), economic growth (all panels), FDI (all panels), financial development (all panels), and infrastructure development (all panels). This study highlights the importance of increasing 4G networking in remote areas and introducing reliable mobile applications to promote smart tourism, which involves setting up a Tourist Information Centre to guide tourists in terms of traveling, accommodation, food, shopping, parking, history of specific places, healthcare services, weather forecasting, and emergencies. The central bank could ensure price stability by using different tools of monetary and fiscal policy while encouraging FDI and ICT infrastructure in the tourism industry, especially in developing countries. Tourism is directly associated with foreign exchange earnings, which in turn increases the financial strength of an economy. Besides, prioritizing investment in infrastructure, particularly in sanitation and waste management, drinking water supply, clean fuel management, and generation of electricity, could bolster tourism. The contribution of this study employs multiple indicators in the form of a composite index (i.e., global tourism index, ICT index, and infrastructure index). In addition, we have developed a global ICT index using several related indicators.

Determinants of Economic Growth: A Granger Causality Analysis

ABSTRACT: Countries devote a lot of time and effort to develop economically, but they nevertheless struggle to attain that growth consistently. Research into economic growth should have provided some guidance as to which actions these countries should adopt, but multiple studies using different methods and datasets generally have led to an array of outcomes that contradict one another. However, Granger causality analysis can provide better insight into the relationship between some key variables and economic growth to give these countries more direction. Granger causality results establish a stronger connection between variables, even though they do not depict true causation. We therefore use a Vector Auto Regression method with Generalized Method of Moments estimation and then Granger-causality to discover how commonly used variables in the literature individually impact economic growth and in what way for a selection of OECD and non-OECD countries. We choose government expenditure, foreign direct investment (FDI), education (as a proxy for human capital), population growth, urbanization, and trade openness as our variables of interest. We also utilize updated datasets from the World Development Indicators (WDI) ranging from the years 2000-2016, based on the availability of the data. We find that FDI and population growth do Granger-cause economic development for OECD countries but that government expenditures, education, urbanization, and trade openness do not show such Granger causality. However economic growth Granger-causes government expenditures, FDI, and education for these OECD countries. For the non-OECD countries, we find that FDI, population growth, and trade openness Granger-cause growth but Granger causality does not occur from government expenditure, education, and urbanization to economic development. Yet similar to the OECD countries, economic growth does Granger-cause FDI and trade openness for the non-OECD countries as well. The overall results indicate that all countries should encourage the expansion of foreign direct investment to grow their economy, which then in turn can lead to additional investment as well as more resources available for the country as a whole. We also suggest further studies should focus on the economic development of individual countries rather than regions, particularly in terms of how technology can drive growth and impact these other variables.

FDI–Growth Nexus in Emerging Economies: Role of Financial Sector Development

This paper examined the relationship between foreign direct investment (FDI) inflows and the growth rate in emerging and developing economies (EMDEs) and whether the development of the financial sector affects the growth-effect of FDI inflows for these economies. FDI enhances capital accumulation in the economy, and the level of financial sector development (FSD) affects the financial intermediation of funds, thereby enhancing the absorptive capability from investment. Using the dynamic panel threshold model (DPTM) for a balanced panel of 71 countries over the period 2000–2019, the paper finds a U-shaped relationship between the measures of FSD and the growth rate of an economy and does not find evidence for the ‘vanishing effect of finance’ for EMDEs. The growth-enhancing effect of FDI is much stronger for countries with a higher level of FSD. Our estimation techniques control for cross-sectional dependence and endogeneity in the case of a dynamic framework. The robustness results estimated using four-year non-overlapping averages as an observational unit support the findings. JEL Codes: F23, F36, O16

How Does FDI-Led Growth Strategy Work? Some Lessons from China for Developing Countries

<p class="MsoNormal" style="margin: 12pt 0cm 0.0001pt 6.6pt; text-align: justify;"><span lang="EN-US" style="font-family: 'times new roman', times, serif; font-size: 14pt;">Foreign direct investment (FDI) is widely viewed as a key driving force behind China’s exceptional growth performance in the last four decades. This paper investigates several questions posed by China’s success in capturing gains from FDI. What explains that success? Can other countries replicate it, or is it unique to China? What lessons are from China for other countries? China indeed has advantages in attracting FDI such as huge market and cheap labor, the well-designed policy and strategy, however, seem to play more important role in the successful story. Our empirical estimates support on four hypotheses: FDI and GDP growth in China positively interact each other; FDI is helpful to China’s technological progress, FDI promotes China’s industrial development, and FDI stimulates China’s manufactured exports.</span></p>

Foreign Direct Investment and Economic Growth in Nigeria: A Revisit

This study examined the impact of foreign direct investment (FDI) on economic growth in Nigeria from 1981 to 2022. Real gross domestic product growth rate (RGDPGR) was the proxy for economic growth while foreign direct investment (FDI), gross fixed capital formation (GFCF), per capita income (PCI) and exchange rate (EXR) were the explanatory variables. The study employed the autoregressive distributed lag (ARDL) technique to estimate the model, while the eclectic paradigm and endogenous growth theory served as the theoretical framework for the study. The results revealed that in the long run, foreign direct investment, per capita income and exchange rate were positive but statistically insignificant to economic growth in Nigeria, while gross fixed capital formation was insignificant. However, in the short, GFCF had significant negative impact on economic growth in the second lagged year showing that a unit increase in GFCF decreased RGDPGR by approximately 10.21% while per capita income impacted positively on the growth of the Nigerian economy. Consequently, the study recommended that as a signal of market size for the inflow of FDI and particularly as a signal of human capital development, the government should increase her investment in human capital development focusing on technical skills relevant in manufacturing and service sectors to engender growth in per capita income to attract FDI and economic growth in Nigeria.

Does foreign direct investment cause economic growth in India? An econometric analysis

With the lack of finance, many developing nations are struggling for investment in several areas to generate an opportunity for sustainable livelihood, and Foreign Direct Investment (FDI) emerged as an engine of economic growth, especially in developing nations. It helps to strengthen the economy by mainly promoting capital inflow and technical improvement into the recipient economies. However, some literatures found economic growth, responsible for the inflow of FDI. Therefore, this paper attempts to examine the causal relationship between FDI and Economic Growth in India. By running the Granger causality test in VECM settings, this study found, GDP causes inflow of FDI in India.

FDI, Foreign Debt, and Economic Growth: The South Asian Perspective (1980-2020)

The present study examines the intricate relationship between foreign direct investment (FDI), foreign debt, and economic growth over the period of 1980 to 2020 in the following countries: India, Pakistan, Sri Lanka, Bangladesh, Nepal, Maldives, and Bhutan. The analysis utilizes data obtained from the World Bank, with productive projects, improved technology and expertise, technological transfer, foreign direct investment (FDI), export, import, and productive projects serving as independent variables. GDP growth is considered as the dependent variable. The model is subjected to rigorous testing procedures, which include the Fisher-Type ADF (for panel unit root), co-integration tests, histogram-based normality assessment, White test for heteroscedasticity, VIF (variance inflation factor) test for multicollinearity, and F-test for parameter significance. These procedures are implemented to ensure the model's robustness. Subsequent analysis is guided by the Hausman test's preference for the Fixed Effects (FE) model over the Random Effects (RE) model. It is worth noting that in both the FE and RE models, a negative correlation is observed between foreign debt and economic growth. The foreign direct investment (FDI) growth rate is inversely proportional to the growth rate of economic output (0.025 percent) and foreign debt (0.117 percent), according to the FE model. The interdependence of foreign direct investment (FDI) and foreign debt underscores the criticality for developing countries to effectively manage their foreign debt while facilitating FDI inflow. The research emphasizes that policy frameworks in these nations must reduce foreign debt in order to create an environment that is favorable for greater foreign direct investment.

FDI, Foreign Debt, and Economic Growth: The South Asian Perspective (1980-2020)

The present study examines the intricate relationship between foreign direct investment (FDI), foreign debt, and economic growth over the period of 1980 to 2020 in the following countries: India, Pakistan, Sri Lanka, Bangladesh, Nepal, Maldives, and Bhutan. The analysis utilizes data obtained from the World Bank, with productive projects, improved technology and expertise, technological transfer, foreign direct investment (FDI), export, import, and productive projects serving as independent variables. GDP growth is considered as the dependent variable. The model is subjected to rigorous testing procedures, which include the Fisher-Type ADF (for panel unit root), co-integration tests, histogram-based normality assessment, White test for heteroscedasticity, VIF (variance inflation factor) test for multicollinearity, and F-test for parameter significance. These procedures are implemented to ensure the model's robustness. Subsequent analysis is guided by the Hausman test's preference for the Fixed Effects (FE) model over the Random Effects (RE) model. It is worth noting that in both the FE and RE models, a negative correlation is observed between foreign debt and economic growth. The foreign direct investment (FDI) growth rate is inversely proportional to the growth rate of economic output (0.025 percent) and foreign debt (0.117 percent), according to the FE model. The interdependence of foreign direct investment (FDI) and foreign debt underscores the criticality for developing countries to effectively manage their foreign debt while facilitating FDI inflow. The research emphasizes that policy frameworks in these nations must reduce foreign debt in order to create an environment that is favorable for greater foreign direct investment.

Impact Study of Foreign Direct Investment on Carbon Dioxide Emission, Economic Growth, Trade Openness for India following ARDL Approach

Foreign Direct Investment (FDI) is instrumental in increasing growth and development in many countries. The development outcomes of FDI must also be analysed, considering the long-term holistic implications of economic growth and environmental implications. Environmental consequences of FDI need to be analysed to better understand the developmental potentials of FDI. The objective of this study is to analyse the equilibrium relationship among carbon dioxide emission, inward FDI, trade openness, and economic growth considering India by using an autoregressive distributed lag model. This model overcomes the effect of endogeneity and indicates that there is a strong cointegrating relation between all the variables with significant long-run effects for economic growth and trade openness and insignificant results with carbon dioxide emission and inward FDI.

FDI and economic growth in Indonesia: a provincial and sectoral analysis

Foreign direct investment (FDI) plays an essential role in growing the economy, where this role runs through two things, namely capital accumulation and technology transfer. However, in the literature, previous research findings are still inconclusive to show positive contributions of FDI on economic growth. Furthermore, while the impact of FDI on economic growth has been studied using sectoral data, there has been less research done using data at the provincial and sectoral levels. This study aims to analyze the impact of foreign direct investment (FDI) on economic growth employing sectoral data at the provincial level (33 provinces) in Indonesia over 2010–2019. Based on the fixed effects estimator, our estimation results prove that, in general, FDI significantly positively impacts economic growth in the Indonesian provinces. We also find that FDI in the mining, manufacturing, water, gas and electricity, hotels and restaurants, and real estate sectors has a significant positive effect on economic growth. Meanwhile, only FDI in the agricultural sector has a significant negative impact. Our estimation results confirm that FDI in the manufacturing sector contributes positively and has a considerable impact. The results are robust to the GMM System estimator, which considers the endogeneity problem.

Correlation between Foreign Direct Investment and Economic Growth in Nepal

Nepal's strategic location between India and China, coupled with favorable market access and lower tariffs, presents an enticing prospect for foreign investors. Despite these advantages, the nation faces challenges, including a fragile financial sector, bureaucratic hurdles, and political instability, hindering substantial Foreign Direct Investment (FDI). This study investigates the correlation between FDI and economic growth in Nepal, recognizing the critical role of FDI in the country's development. The goal of the study is to examine the linear relationship between these factors while analyzing the trajectory and structure of foreign direct investment and economic growth in Nepal. Among the specific goals are looking at FDI inflow by sector, assessing the link between FDI and economic growth, and developing theories based on these goals. The research design is explorative, descriptive, and analytical, employing time series data from FY 1994 to 2021. Data is sourced from government bodies like NRB, MOF, MOI, and CBS, and econometric tools are applied for analysis. Limitations include reliance on secondary data and a study period of 25 years. The study underscores the need for an investor-friendly environment to attract foreign investments and addresses the challenge of accumulating capital domestically. Recognizing the indispensable role of FDI in Nepal's economic development, the study provides insights for policymakers and recommends investment-friendly policies to promote FDI inflows and contribute to economic growth.

Exploring the Dynamic Links between FDI and Economic Growth in MENA Countries

This article aims to explore the causal relationship between economic growth and foreign direct investment (FDI). It draws upon various theoretical and empirical studies that investigate the impact of FDI on economic growth. Additionally, we assess the dynamic relationship between FDI and economic growth in a sample of 22 countries in the MENA region. The estimation of this dynamic relationship for the years 1985-2020 across these countries is conducted using the Generalized Method of Moments (GMM). Furthermore, the Dumitrescu and Hurlin (2012) test is employed to scrutinize the presence or absence of a causal direction in panel data between FDI and economic growth, approximated by gross domestic product (GDP). Our findings suggest the existence of a unidirectional relationship from FDI to economic growth.

Research on the Influence of FDI on China’s Economic Innovation Development

Foreign direct investment (FDI) and outward foreign direct investment (OFDI) are the primary methods through which capital moves internationally. They serve as significant conduits for technological spillover, which is vital for the progress of countries and regions. Through the combined impact of the growth in foreign direct investment and the two-way flow of FDI, China may enhance its access to various production resources, including labor, capital, and energy. Additionally, this enables China to improve the distribution of intangible assets such as knowledge and technology. Consequently, there is an urgent need to establish and implement a strategy that prioritizes innovation-driven development.This study utilizes China’s provincial panel data from 2000-2020 to examine the relationship between the expansion of foreign direct investment (FDI) and the level of innovation. The regional innovation index is used as the dependent variable, while the FDI scale is used as the independent variable. Additionally, a model is employed to test the impact of China’s FDI scale expansion on regional innovation capacity. Simultaneously, this study takes into account the disparities in development between the eastern region and the central and western regions, as well as the influence of the Pilot Free Trade Zone policy. Consequently, the sample is further categorized into the eastern region, central region, and western region for a more detailed analysis. Relevant countermeasures are provided based on the results of the empirical analysis mentioned above.

ՀՀ ՏՆՏԵՍՈՒԹՅԱՆ ՀԱՄԱՐ «ՕՏԱՐԵՐԿՐՅԱ ՈՒՂՂԱԿԻ ՆԵՐԴՐՈՒՄՆԵՐ - ՏՆՏԵՍԱԿԱՆ ԱՃ» ԿԱՊԻ ՎԵՐԼՈՒԾՈՒԹՅՈՒՆԸ / ANALYSIS OF THE RELATIONSHIP «FOREIGN DIRECT INVESTMENTS - ECONOMIC GROWTH» FOR RA ECONOMY

The growth of foreign direct investment (FDI) as a component of GDP certainly contributes to economic growth. However, one should not forget that the relationship "economic growth - FDI" is "bi-directional", that is, in addition to the fact that FDI stimulates growth, it is also affected by economic growth. If there are many scientific and practical studies on the first, "traditional" direction of this "two-way" relationship, its other side - the impact of economic growth on FDI, has not been sufficiently studied. The goal of this article is to evaluate the impact of the growth of RA economy sectors on FDI using regression models. In the given article, the RA economy was regarded as an aggregate of the following sectors: industry, agriculture, construction, services and trade. Multi-factor regression models were built in order to identify and evaluate the connections between FDI and economy sectors in RA. An economic analysis of the results obtained by the models was also performed, and the impact on FDI was estimated for each of the considered factors. Particularly, the econometric analysis shows that, other conditions being equal: • 1% increase in the growth rate of industrial output leads to a 2.6% decrease in the volume of FDI. • 1% growth of the service sector contributes to the 5.5% growth of the volume of FDI. • 1% increase in agriculture leads to a 4.2% increase in the volume of FDI. • Increase in the trade sector leads to the increase of FDI volume, whereas the increase in the construction leads to the decrease of it.

Exploring the Long-Term Relationship between Foreign Direct Investment and GDP: Empirical Insights from Bangladesh

The study's purpose is to examine the long-term correlation between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) in Bangladesh. The article is mostly based on secondary data collected from Bangladesh Bank’s website covering for the period 1980-2021. Data were processed with the assistance of the Statistical Package of Social Science (SPSS IBM 23 Version). Correlation and regression analyses were used to examine the data in the study. The results suggest that there is a high degree of positive correlation (0.976) between FDI and GDP, along with the implication that FDI has a significant positive impact on GDP in the long run within the Bangladesh economy. The results also suggest that if FDI changes by 1 unit, then the GDP will positively change by 0.92381 at the level of 5% significant statistically. This finding is reinforced by the regression analysis, which indicates a statistically significant relationship between FDI and GDP growth. So, it is understandable that there is a well-built impact of FDI on Gross Domestic Product (GDP) in the long-run in the Bangladeshi economy. These results are further supported by regression analysis, underscoring a statistically significant relationship between FDI and GDP growth. However, it is important to acknowledge certain limitations, such as data availability constraints and potential confounding variables not addressed in the analysis. Future research endeavors could address these limitations and explore additional factors influencing the FDI-GDP relationship in Bangladesh. Overall, the study highlights the substantial impact of FDI on Gross Domestic Product in the long run and discusses policy recommendations to attract FDI inflows to Bangladesh.