Foreign Direct Investment Inflows Research Articles

Influence of Quality Education on FDI Inflows in Subs-Saharan Africa: A Theoretical and Empirical Research

The non-traditional influences of Foreign Direct Investment (FDI) are increasingly gaining attention in international business studies; however, the empirical evidence of these influences is still scant. Using human capital theory within the context of the national competitive framework, the study reported in this paper considers the progress towards achieving Quality education as a likely influence of FDI inflows in Sub-Saharan Africa (SSA). The paper employs a panel data research design and conducts fixed effects estimations. The analysis categorizes FDI flows into global FDI, FDI from developed countries, and FDI from developing countries to SSA. Thus, the paper is centred around three research questions: (1) How does progress toward quality education influence global FDI inflows? (2) How does progress towards quality education influence FDI inflows from developed and (3) from developing countries? The analysis mainly utilizes a bespoke dataset from the United Nations Conference on Trade and Development (UNCTAD) and data from trustworthy databases such as UNCTADSTAT and the World Development Indicators (WDI). The results support the claim of the increasing importance of non-traditional influences of FDI flow. Quality Education significantly influenced FDI inflows from the globe and developing countries to SSA. This research provides further evidence that the national competitive framework can thoroughly explain the factors that have different significant powers in influencing FDI flows to SSA from developed and developing countries. The study is highly policy-relevant because it examines the effects of the degree of attainment of specific UN Sustainable Development Goals (quality education) on inward FDI performance. It, therefore, shows the benefits of SSA countries investing in the SDGs for the policy goal of attracting more considerable amounts of inward FDI.

Impact of Trade Liberalization Policies on Investment and Development in Developing Countries

Purpose: The aim of the study was to analyze the impact of trade liberalization policies on investment and development in developing countries Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Trade liberalization policies have led to increased foreign direct investment (FDI) inflows and export opportunities in developing countries. However, they have also posed challenges such as heightened competition and vulnerability to external shocks. The effectiveness of trade liberalization policies varies across countries and depends on factors such as institutional capacity, infrastructure, and trade-related regulations. Unique Contribution to Theory, Practice and Policy: Dependency theory, institutional theory & stages of economic development theory may be used to anchor future studies on the impact of trade liberalization policies on investment and development in developing countries. Policymakers should prioritize the design and implementation of targeted interventions aimed at maximizing the benefits of trade liberalization while mitigating its potential adverse effects. Moreover, policymakers should prioritize investments in education, healthcare, and social protection to enhance human capital development and ensure that the benefits of trade liberalization are equitably distributed across society

The Role of Foreign Direct Investment Inflows on Labour Force Participation Rate of Women: A Dynamic Panel Data Analysis

The Role of Foreign Direct Investment Inflows on Labour Force Participation Rate of Women: A Dynamic Panel Data Analysis

Exploring FDI Policies and Trends: Insights from the Indian Landscape

"In the present-day global economic landscape, FDI emerges as a pivotal driver for economic progress, especially in developing nations. Over recent years, propelled by the wave of globalization, numerous Asian developing economies have experienced a substantial surge in FDI. Notably, India has emerged as a prominent FDI destination, witnessing a notable upswing in FDI inflows. Given the paramount significance of FDI in the modern economic landscape and its noteworthy strides in India, a comprehensive analysis encompassing shifts in FDI policy, determinants of FDI attraction, and its ramifications on the domestic economy becomes imperative. This paper endeavors to scrutinize the evolution of FDI policies in India, delve into the diverse factors shaping FDI influx and ultimately assess the profound impact that FDI has exerted on the Indian economic landscape. FDI Surge in India: India has experienced a substantial surge in Foreign Direct Investment (FDI) in recent years, making it a prominent destination for global investors."

A STUDY ON IMPACT OF FOREIGN DIRECT INVESTMENT ON BALANCE OF PAYMENTS

Foreign Direct Investment (FDI) exerts a multifaceted influence on a country's Balance of Payments (BOP), encompassing both the capital and current accounts. In the capital account, FDI inflows represent crucial long-term investments by foreign entities into domestic assets, spanning from establishing new ventures to acquiring existing businesses or funding infrastructure projects. These inflows augment the country's capital base, providing essential funding for development endeavors, particularly vital for emerging economies. Additionally, FDI facilitates technology transfer and managerial expertise, fostering innovation and enhancing productivity. Consequently, this bolsters the competitiveness of domestic industries, potentially leading to increased exports and improved trade balances. However, FDI outflows, in the form of profits, dividends, and royalties repatriated by foreign investors, impact the income account of the current BOP, constituting outflows. Furthermore, FDI's influence extends to exchange rates, where significant inflows may lead to currency appreciation, affecting trade dynamics.

Shadow Economy: Determinants and Its Impact on Foreign Direct Investment

The shadow economy poses a significant threat to government revenue and the effectiveness of economic policies. This paper investigates the causes of the shadow economy and its influence on foreign direct investment (FDI). Our study employs the currency demand approach, a component of the indirect method, to identify the determinants of the shadow economy in a dataset covering 105 countries from 2001 to 2017. These countries are categorized into four income groups: high-income, upper-middle-income, lower-middle-income, and low-income. Parameter estimation is conducted using the Generalized Method of Moments (GMM) model, with robustness tests incorporating reference estimates from Partial Least Squares (PLS) and Fixed Effects Model (FEM). Our findings indicate that a higher GDP and lower interest rates are associated with reduced shadow economy activity. Elevated market interest rates increase the cost of funds in the informal sector, discouraging engagement in shadow economic activities due to reduced profitability. Furthermore, higher tax revenues correlate with intensified regulatory enforcement, increasing the risks associated with shadow economy involvement. A larger workforce and lower unemployment rates similarly diminish shadow economy activity. In the context of foreign direct investment (FDI), the shadow economy positively affects FDI flows when formal institutions, including legal frameworks, property rights protection, and regulatory systems, are either weak or overly burdensome. In such scenarios, economic actors may opt for informal channels like the shadow economy, offering a flexible and cost-effective alternative to the formal sector, a crucial consideration for foreign investors.

Interlinkages between bilateral investment treaties and FDI flows to emerging economies: evidence from BRICS

PurposeThis study aims to examine the role of Bilateral Investment Treaties (BITs) in attracting higher foreign direct investment (FDI) inflows into the major emerging economies namely Brazil, Russia, India, China and South Africa (BRICS) from the source developed, developing and other emerging economies over a period of 18 years from 2001 to 2018.Design/methodology/approachTo estimate the results, panel data regression on a gravity-knowledge capital model has been used. To account for the problem of endogeneity we have used the two-step difference Generalised Method of Moments estimator proposed by Arellano and Bond (1991).FindingsWe find that contradictory to theory and expectations, BITs result in a fall in FDI inflows in BRICS economies. BITs ratified by BRICS economies are not able to provide a sound and secure investment environment to foreign investors, thereby discouraging FDI in these economies.Originality/valueTo the best of the authors’ knowledge, this study is the first to examine the impact of BITs on FDI inflows into the emerging BRICS economies. Further, the impact of BITs on FDI flows among developed nations, i.e. north-north FDI and from developed to developing countries, i.e. north-south FDI has already been studied by many researchers. But so far, no study has examined this impact on FDI among developing and emerging economies (south-south FDI), despite an increase in FDI flows among these economies. Therefore, this study seeks to overcome the limitations of previous studies and tries to find out the impact of BITs on FDI inflows in BRICS economies not only from source developed but also from source developing and other emerging economies.

Factors Influencing the Foreign Direct Investment Inflow in the Service Sector in China

Factors Influencing the Foreign Direct Investment Inflow in the Service Sector in China

Is There Any Link Between FDI and Profitability in the Indian Manufacturing Sector?

Although a plethora of studies examine the determinants of profitability, this study adds to existing literature by assessing whether foreign direct investment (FDI) inflows make any significant contribution to profitability. To do so, the article uses disaggregated annual data relating to the Indian manufacturing sector 2012−2019. Results obtained from employing panel data models showed that FDI inflows have a positive and significant impact on profitability. Further, our results indicate that FDI affects profitability only in the long run but not in the short run. Capital intensity and size do not affect the profitability of the Indian manufacturing sector. From a policy perspective, it is imperative for manufacturing industries in India to attract more FDI inflow in order to boost profitability in the long run.

Fueling a greener tomorrow: The impact of energy diversification on green growth

AbstractMotivated by the necessity of attaining carbon neutrality and striking a balance between clean and conventional energy sources, the emphasis is on how urgent it is to combat climate change and make the switch to sustainable energy systems. In this context, the current study aims to examine the effects of energy diversification on green growth, considering such complementary factors as green technology, human capital, remittance inflows, foreign direct investment inflows, trade openness, and gross fixed capital formation. An empirical analysis is conducted by framing a green growth function in the panel data framework which is analyzed using the dynamic standard correlated model for the BRICS nations (Brazil, Russia, India, China, and South Africa) for the period between 1995 and 2020. The results show that (i) energy diversification exerts a dampening effect on the trajectory of green growth, (ii) the process of green growth was affected due to green technology and foreign direct investment inflows, (iii) underscores the pivotal role of human capital and gross fixed capital formation in bolstering the green growth trajectory, (iv) despite their potential relevance, remittance inflows and trade openness exhibit negligible impact within the framework of the green growth function, thus underscoring their limited contribution to the overarching sustainable development. The practical policy recommendations and invaluable insights provided by these empirical findings are instrumental in fostering green growth among the BRICS countries. Moreover, it contributes to the discourse on sustainable development by providing a solid foothold for informing the development of relevant policies in similar situations around the world.

Trend of Foreign Direct Investment in Tanzania's Real Estate Industry From 2000 - 2020: A Systematic Review

Foreign direct investment (FDI) has become an area of concern to many developing nations due to the economic benefits it presents to the host nation. Despite the notable growth and potential of the Tanzanian real estate market, there is lack of comprehensive, empirical studies that analyze the specific patterns of FDI inflows in the real estate industry in Tanzania over an extended period and their contributions to national GDP and other economic indicators. This systematic review aims to examine the trend of foreign direct investment (FDI) in Tanzania’s real estate industry from 2000 – 2020. Further, this review helps to determine the contribution of FDI to growth of GDP and other economic indicators in the country. Result shows that there was an irregular trend of FDI inflows in Tanzania’s real estate activities with various asymmetrical decrease and increase throughout the period from 2000 – 2020. However, the FDI inflows in real estate activities is not significantly associated with national GDP, national GDP growth rate, total FDI inflows in the country or contribution of the real estate activities in national GDP. There was a higher growth rate (between 4.2% - 7.5%) of real estate activities from 2000 – 2010, but was followed by a sharp decline to less than 2% in 2011 and then a steady growth rate of above 4% from 2015 – 2020. The percentage shares of GDP by real estate activities was relatively higher and steady from 2000 – 2010, followed by sharp decline from 2010 – 2011 and further decrease towards 2020. Further analysis indicated that there was a general increase in contribution of real estate activities in national GDP from 2000 – 2020. It is concluded that, FDI inflows in Tanzania’s real estate activities show an irregular trend with various asymmetrical decrease and increase throughout the period. The annual growth rate (%) of real estate activities in national GDP displays an irregular trend from 2000 – 2020. Further, there is a general increase in contribution of real estate activities in national GDP during the review period.

How Does Foreign Direct Investment Impact the Sustainable Development? Empirical Evidence from China’s Coastal Areas

As one of the important driving forces of sustainable development in coastal areas, foreign direct investment (FDI) has provided new ideas for exploring optimal strategies. This analysis explores the linear impact of FDI on sustainable development in coastal areas with 53 cities in China from 2012 to 2020. Accordingly, a dynamic panel smoothed transition regression (PSTR) model is used to analyze the non-linear impact of FDI on sustainable development, with transition mechanisms of industrial structure and technological innovation level. The findings reveal that the non-linear effect of FDI on the sustainable development of coastal areas is obvious. When the coastal area’s industrial structure is more optimized, and the level of technological innovation is higher, the promotion effect of FDI on sustainable development is more obvious. Further, the threshold effect of industrial structure and technological innovation is different. The threshold conversion rate of industrial structure is faster, but the threshold effect of technological innovation is stronger. Regionally, the impact of FDI on the sustainable development of coastal adjacent areas is significant, but not on the sustainable development of inland areas due to the few FDI inflows. This analysis offers guidance for policymakers to further develop the tertiary industry, increase financial investment in innovation in coastal areas and encourage enterprises to improve their independent innovation capacity.

FDI and industrial development in a mega-city region: a modelling study on the Pearl River Delta

ABSTRACT Foreign direct investment (FDI) and regional development are mutually interwoven phenomena. This paper introduces an analytical framework to investigate the interaction mechanism between FDI and regional industrial structure. This framework posits first that FDI generally has a significant influence on the industrial structure in the region concerned, specifically through intervening mechanisms such as capital supply, active selection, passive competition, product linkage, imitation and demonstration and employee flows. Secondly, the industrial structure, in turn, also affects FDI flows through mechanisms including market demand, factor supply and policy or institutional factors. Finally, there are bi-directional interactions; using a spatial interaction framework, the present study applies and tests a simultaneous equation model and a spatial Durbin model to analyse empirical data from 15 urban regions in the Pearl River Delta mega-city region (PRD) in China spanning the period 2005–2018. The key findings from this multi-scalar analysis are: (i) there are substantial interactive effects between FDI and industrial structure, with the rationalisation and upgrading of the industrial structure significantly promoting FDI inflows into the PRD; (ii) FDI inflows, in turn, contribute to the reinforcement and upgrading of the industrial structure in the PRD; and (iii) the interactions between FDI and industrial structure exhibit significant spatial-economic growth effects. We also find that moderator factors, including independent R&D level, market size, marketisation level, labour cost, infrastructure and government expenditure, have discernible impacts on FDI inflows and the rationalisation and upscaling of the industrial-economic structure in the area concerned. Finally, we note that, in our study, significant spatial dependence effects among urban areas inside the PRD area are observed and modelled. The discussion of the empirical findings leads to the identification of several important policy implications and lessons for regional development strategies from an FDI perspective.

An investigation of the decline in the returns to higher education in Vietnam

ABSTRACT Vietnam’s economy and education system have had remarkable success in recent decades, yet there are concerns about the declining returns to higher education since 2008. We document this decline in returns to higher education and propose four hypotheses to explain it. Analysis of the VLSS/VHLSS and LFS data provides little evidence for three of four hypotheses. The fourth hypothesis is that changes in the demand for highly educated labor in Vietnam, perhaps due to recent changes in foreign direct investment inflows, rather than the labor supply, are perhaps the most important determinant of the returns to education across different levels.

A STUDY ON IMPACT OF STOCK INDICES ON FOREIGN DIRECT INVESTMENT

This study investigates the relationship between Foreign Direct Investment (FDI) inflows and the performance of key Indian stock indices, specifically the Nifty 50 and BSE Sensex, from April 2020 to December 2023. Despite FDI's crucial role in economic growth, existing research has often overlooked the nuanced interplay between stock market fluctuations and FDI within the Indian context. This study aims to fill this gap by analyzing the correlation and causal effects between these indices and FDI inflows, alongside a sectoral FDI trend analysis from 2020 to 2023. Utilizing secondary data, descriptive statistics, correlation, and regression analysis, the study found moderate positive correlations between the stock indices and FDI inflows; however, these relationships were not statistically significant, potentially due to the limited sample size. The regression models demonstrated weak predictive power and substantial unexplained variability, indicating that factors beyond stock market performance likely influence FDI inflows. Despite these limitations, the study highlights the need for more comprehensive data and analysis to better understand the dynamics between stock indices and FDI, providing valuable insights for policymakers to enhance India's investment climate and global competitiveness. Key Words: Moderate positive correlations, Limited sample size, statistically significant, Predictive power, Unexplained variability & Investment climate

Economic, social and institutional determinants of FDI inflows: A comparative analysis of developed and developing economies

This paper investigates the determinants of Foreign Direct Investment (FDI) inflows by classifying determinants into economic, social, and institutional categories, and examines its linkage between FDI in developed and developing economies at an aggregate level. Countries are distinguished in accordance with country income level, and each category is constructed as a composite index by utilizing the Principal Component Analysis (PCA) method. Using annual data from 1996 to 2019 and panel data approaches, the determinants of FDI are investigated for 178 countries. Main findings are, first, developing economies are largely dependent on economic indicators to attract FDI. Second, in the case of developed economies, the role of social indicators on FDI inflows is shown relatively more significant than economic indicators. Finally, the linkage between institutional indicators and FDI inflows is weak and statistically insignificant in both developed and developing economies.

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.

Legal environment as a factor in the inflow of Foreign Direct Investment: Case of Serbia

The economic growth and development of a country depend on the inflow of foreign direct investment, and the legal environment factors play an important role in securing it. Compared to other countries in South-Eastern Europe, Serbia has achieved remarkable results in terms of FDI inflows over the last ten years. The research examines the impact of the legal environment on FDI inflows in Serbia. The study was conducted using a quantitative approach and a survey technique based on a structured questionnaire. The basic set of the research consists of the 300 most prominent foreign investors (response rate of 28%) who invested capital in Serbia in the period 2011-2019. The results of the conducted research show that ownership in Serbian companies is the most important factor in the legal environment that influences a foreign investor's decision to invest capital in these companies. The results show that labor legislation, law enforcement, and confidence in the legal system can significantly contribute to a foreign investor's decision to invest capital in Serbia. The legal environment's implications influence investor decisions and shape the overall investment climate of a country. A well-structured and investor-friendly legal framework will increase Serbia's competitiveness and attractiveness for foreign investments.

Do Foreign Yield Curves Predict U.S. Recessions and GDP Growth?

AbstractForeign term spreads constructed from bond yields of non‐U.S. G‐7 constituents predict future U.S. recessions and foreign term spreads are stronger predictors of U.S. recessions occurring within the next year than U.S. term spreads. U.S. and foreign term spreads are both informative of the U.S. economy but over different horizons and for different components of economic activity. Smaller U.S. term spreads lead to smaller foreign term spreads and U.S. Dollar appreciation. Smaller foreign term spreads do not lead to significant U.S. Dollar depreciation but do lead to persistent declines in U.S. exports and foreign direct investment (FDI) flows into the United States. These findings are consistent with the proposition that foreign term spreads embed growth spillovers from the U.S. and the resulting Dollar strength and slowdown abroad spill back to the United States.

Do foreign direct investment and foreign aid accelerate economic growth in developing countries?

PurposeThis paper aims to study the impact of foreign direct investment (FDI) and official development assistance (ODA) on the economic growth of developing countries. This paper classifies sample countries into two groups (low- and high-income developing countries) based on income level and investigates whether the two sources of foreign capital have different effects on the economic development of each subgroup of countries.Design/methodology/approachThe authors analyze panel data on 93 countries from 1981 to 2020 using a two-stage least squares (2SLS) estimation. The 2SLS method is used to overcome the endogeneity problem between economic growth and FDI. The sources of the data are World Bank and OECD.FindingsFirst, FDI inflows tend to accelerate per capita GDP growth in both total sample countries and within both groups of countries. Second, ODA has a significant impact on per capita GDP growth only for low-income developing countries. This result indicates that ODA seems to be particularly important for low-income developing countries.Practical implicationsThis paper suggests policy implications that low-income developing countries should create an environment for more ODA funds to flow into themselves with efforts such as improving the credibility and effectiveness of the government related to ODA programs. It also provides implications for donors of ODA to focus their ODA resources on low-income developing countries to more effectively achieve the goal of helping developing countries’ economic growth.Originality/valueThis paper investigates whether FDI and ODA have different effects on the economic development of low- and high-income developing countries. To the best of authors’ knowledge, this point is not addressed in existing studies.