Foreign Direct Investment Inflows Research Articles

Foreign Direct Investment Inflows into SAARC Countries: Trend Analysis

The study examines the relationship between institutional quality and FDI inflows in SAARC nations from 1981 to 2020. It employs Simple Linear and Semi log linear regression to draw conclusions. The findings indicate that corruption, political stability, government effectiveness, and GDP per capita have a positive and statistically significant influence on FDI inflows. The Semi log linear regression results show that all estimates of government effectiveness, GDP per capita, and trade openness are positive and statistically significant. This research suggests that institutional quality is important for the growth of FDI inflows. As a result, policymakers should prioritize effective institutional reforms to create a favorable investment environment and attract FDI inflows in SAARC countries.

The Impact of Digitalization on FDI Inflows in Saudi Arabia

Aim: This study investigated the impact of digitalization on foreign direct investment (FDI) inflows in Saudi Arabia. m Methods: The study identified critical digitalization and institutional factors and hypothesized their influence on FDI inflows to Saudi Arabia. Multiple linear regression analysis using the Ordinary Least Squares (OLS) method was conducted on data from 1997 to 2022, utilizing SPSS. Results: The outcomes revealed that digital infrastructure and government policy positively and significantly explain the FDI inflows in Saudi Arabia. The null hypothesis was rejected, indicating that effective digitalization and supportive government policy contribute to FDI inflows. Conclusion: The study concluded that internet access, mobile phone usage, and favorable government policies are key factors in attracting FDI inflows into Saudi Arabia. Recommendations: Policymakers should prioritize developing and implementing comprehensive digitalization strategies and regulations to improve digitalization and business-related institutions, raise the standard of digital transformation, and improve the regulatory environment framework to encourage more inward FDI inflows.

BRIC in flux: Understanding the influence of energy policy uncertainty on foreign direct investment flows

AbstractThis research investigates the intricate relationship between energy policy uncertainty (EGU) and foreign direct investment (FDI) within the BRIC economies over a comprehensive 27‐year period, spanning from 1996 to 2022. Employing advanced econometric techniques such as FMOLS and DOLS for regression analysis, the study unravels the nuanced impacts of EGU on both FDI inflows (IFD) and outflows (OFD). Drawing upon a comprehensive data set, the analysis reveals a significant negative correlation between EGU and IFD, indicating that heightened energy policy uncertainties deter foreign capital from entering BRICS nations. Contrarily, the study unveils a paradoxical positive relationship between EGU and OFD, suggesting that energy policy uncertainties stimulate the outflow of FDI, reflecting the adaptive strategies of multinational corporations navigating uncertainties. The study further explores the role of government effectiveness, labour force and financial sector development, shedding light on their positive influences on IFD and negative impacts on OFD. These findings underscore the importance of effective governance, a skilled labour force, and financial sector development in attracting and retaining foreign investments. This research contributes to the literature on energy policy, governance and FDI, offering policymakers and businesses nuanced insights into crafting strategies that enhance the attractiveness of BRIC nations for foreign investments. The study's findings have implications for shaping stable energy policies, improving governance effectiveness and fostering conditions conducive to sustained economic growth and development.

Cross Country Study of Human Capital Formation and USFDI Inflows

Purpose: The neo-classical theory of economic growth features the positive impact of the human capital of an economy on its growth. The inflow of foreign direct investment is one of the main components to carry forward the growth effect, this study investigates the impact of country-specific institutional quality and human capital on the cross-country variations of US-Foreign Direct Investment (FDI) inflows. Our core hypothesis is that Countries with better Human capital will attract more FDI if they have good quality institutions in terms of less risk in investment opportunities. Method: Using a set of panel data of US-Foreign Direct Investment (FDI) inflows for both developed and developing countries over the period 1984-2021. Result: The country-specific quality of institutions reinforces the impact of human capital on the inflow of US foreign direct investment in this study. Using two-dimensional panel data we find strong support for our hypothesis using a two-way fixed effects model. Our results are robust to the alternative measures of institutional quality. Implications: The strength of our approach is that in contrast to the previous works (1) we have used the USFDI inflow across countries that have been widely neglected in the related literature and (2) emphasis has been given to the conditional or joint impact of human capital and country-specific institutional quality in determining the cross-country variations in USFDI inflows.

Determinants of Foreign Direct Investment in ASEAN: Evidence from ASEAN 4 (Cambodia, Laos, Myanmar, and Vietnam)

Most developing countries in the world are working hard to attract more foreign direct investment. Identifying the key determinants of foreign direct investment is therefore seen as an essential task for policy makers. Compared to other parts of the world, the performance of ASEAN countries in attracting foreign direct investment is still poor. This study deals with identifying the determinants of foreign direct investment inflow in ASEAN 4 (Cambodia, Laos, Myanmar, and Vietnam) countries. This study estimates the panel data sample with pooled OLS and fixed and random effect models. The analyzed data covered for the period 2000 to 2020. The empirical results indicate that market size and natural resources are the most robust determinants for FDI inflows into Cambodia, Laos, Myanmar, and Vietnam. Furthermore, the presence of labor costs, infrastructure, and exchange rate exerts a favorable influence on the inflow of FDI to CLMV countries. On the contrary, the findings of the paper reveal that the inflation rate has a detrimental effect on inward FDI. This partly reflects the fact that most of the world’s FDI is market-seeking. This study provides a clear understanding of the scope of the research in the field of FDI determinants as the practical implication for future research.

The impact of foreign direct investment on exports in the kingdom of Saudi Arabia (an empirical study)

This study is considered one of the few studies that attempted to explore the relationship between exports and foreign direct investment in the Kingdom of Saudi Arabia. The study aims to determine the nature of the relationship between exports and foreign direct investment in the Kingdom of Saudi Arabia during the period between (1990–2023). Employing Ender’s methodology using cointegration and error correction model. The study also relies on data on Saudi exports and foreign direct investment inflows from the World Bank databases. The results indicate the existence of Cointegration between foreign direct investment (FDI) inflows and the Saudi exports in the period (1990–2023), as for the causal relationship between the two variables, the results showed the causal relation between exports and FDI inflows from the direction of exports only, which means that Saudi exports cause FDI inflows in Saudi Arabia, and the study recommends giving more incentives to attract foreign investors in different sector rather than oil sector, besides improving the logistical services which is vital to any investment attraction strategy.

UK Foreign Direct Investment in uncertain economic times

This paper uses time-varying Bayesian models to assess the impact of the shifting, and progressively more volatile (especially since the EU Referendum vote in 2016) macroeconomic landscape on Foreign Direct Investment (FDI) inflows to the UK. FDI inflows are depressed in response to higher UK-specific economic and geopolitical uncertainty. A stronger real exchange rate and a higher interest rate also have a negative effect. It benefits from lower UK corporate tax rates and higher US uncertainty, the latter creating investment opportunities in the UK. Rising economic policy uncertainty since the EU Referendum, has led to FDI losses of up to 0.5% of GDP.

Analysing FDI inflow effects on CO2 emissions: a comparative study of OECD and BRICS nations with PHH and PHE models

Purpose The purpose of this study is to explore the correlation between foreign direct investment (FDI) and carbon dioxide (CO2) emissions in emerging economies, with a particular emphasis on Brazil, Russia, India, China and South Africa (BRICS) countries along with 10 the Organization for Economic Cooperation and Development nations. Design/methodology/approach This study uses quantitative research methods and econometric analysis to investigate the relationship between FDI inflows and CO2 emissions in selected countries. Specifically, the research concentrates on assessing the impact of FDI on CO2 emissions within the BRICS countries. By examining data spanning from 2000 to 2003, the study aims to shed light on the interaction between economic integration and environmental sustainability dynamics on a global scale. Findings The results of this study highlight notable contributors to CO2 emissions within the BRICS countries, identifying Switzerland, Denmark and the UK as significant sources. These findings support the notion of a pollution haven, underscoring the influence of FDI in moulding environmental outcomes in developing economies. Research limitations/implications Drawing from the study’s outcomes, suggestions are put forth to foster sustainable development strategies. It is recommended that BRICS nations prioritize the attraction of environmentally aware FDI to bolster efforts aimed at mitigating environmental harm. Originality/value This study adds to the ongoing discussion surrounding sustainable development by offering a concentrated analysis of how FDI influences CO2 emissions within BRICS countries. Its novelty lies in questioning traditional assumptions about environmental accountability and emphasizing the necessity for cooperative endeavours between emerging and developed economies to effectively tackle global environmental issues.

Chinese FDI outflows and host country environment

This study provides first evidence on the effects of Chinese FDI (Foreign Direct Investment) outflows on host country environments. The study draws upon a comprehensive dataset covering aggregate Chinese FDI outflows and sector specific data into 65 host nations over the 2007–2019 period. Employing a STIRPAT (Stochastic Regression on Population, Affluence and Technology) model and several different techniques including DID (Difference-in-Difference), pooled OLS (Ordinary Least Squares), quantile regression, IV (Instrumental Variable) estimation, threshold and Tobit regression, the findings suggest that Chinese FDI leads to an increase in host country CO2 (Carbon Dioxide) emissions, aligning with the pollution haven hypothesis at the aggregate level. A closer investigation at the development regime and sectoral levels indicates that in the low development regime, FDI inflows into the financial and real estate sector increase emissions. Conversely in the high-income regime, Chinese FDI into the entertainment sector is associated with an increase in carbon emissions. Chinese FDI is further found to lead to an increase in emissions in countries with a per capita GDP (Gross Domestic Product) of below USD72041.7. However, as per capita income rises above USD72041.7, FDI leads to a fall in carbon emissions.

Exploring the Nexus Link of Foreign Direct Investment Inflows and Openness on Economic Growth: Evidence from BRICS Economies

This study aims to investigate how Foreign direct investment (FDI) and trade openness influenced economic growth in BRICS countries from 1990 to 2022, using the Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) and System Generalized Method of Moments (System-GMM) methods. Our findings show that these two variables boost economic growth by 0.172, 0.021, 0.291, and 0.072%, respectively. Additionally, the results indicate that BRICS countries have demonstrated greater resilience in terms of FDI and trade before and after the COVID-19 pandemic and the Russia-Ukraine war, underscoring the effectiveness of their investment and trade policies in maintaining economic growth amidst global disruptions.

RCEP: IMPLICATIONS AND CHALLENGES FOR THE EUROPEAN UNION IN A CHANGING GLOBAL ECONOMY

The Regional Comprehensive Economic Partnership (RCEP), emanating from the core principles of the Association of South East Asian Nations (ASEAN), represents a significant evolution in regional economic cooperation. This article delves into the intricate dynamics of RCEP, emphasizing its inception, growth, and the profound implications it holds for the European Union (EU). Tracing the history of ASEAN and its expansion, the paper examines how the ASEAN's Free Trade Agreements (FTAs) with nations outside Southeast Asia, including China, South Korea, New Zealand, Australia, and India, laid the groundwork for RCEP. The study highlights the strategic objectives of RCEP in fostering trade liberalization and economic integration among its member states, while also addressing disputes and promoting regional stability. The signing of RCEP in November 2020 marked a pivotal moment in Asia-Pacific economic relations, promising significant shifts in global trade dynamics. This research critically analyses the potential impact of RCEP on the EU, particularly in terms of trade, foreign direct investment (FDI) inflows, and the broader implications for the global multilateral trading system. The paper also explores how RCEP could reshape the EU's role and strategies in regional and global economic contexts, assessing the challenges and opportunities it presents for EU-ASEAN collaborations. The evolving relationship between Southeast Asia and the EU under the shadow of RCEP, including the promotion of regional trade at micro and macro levels, forms a critical part of this analysis. The study aims to provide comprehensive insights into the multifaceted effects of RCEP on the EU, offering valuable perspectives for policymakers and stakeholders in both regions.

A Gravity Model Approach for Determining Foreign Direct Investment Flows between India and the Gulf Cooperation Council (GCC) Countries

A Gravity Model Approach for Determining Foreign Direct Investment Flows between India and the Gulf Cooperation Council (GCC) Countries

Influence of Political Stability on Foreign Direct Investment (FDI) Inflows in Nigeria

Purpose: The aim of the study was to assess the influence of political stability on foreign direct investment (FDI) inflows in Nigeria. 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: The study indicated that political stability significantly influences foreign direct investment (FDI) inflows, as investors seek environments where their investments are secure and can yield predictable returns. Stable political conditions reduce risks related to government policy changes, expropriation, and civil unrest, thereby attracting more FDI. Conversely, political instability, marked by frequent government changes, corruption, and social unrest, deters investors due to increased uncertainty and risk. Studies have shown that countries with stable political climates tend to receive higher FDI inflows as they offer a safer, more predictable investment environment. Additionally, strong institutions and good governance practices further enhance investor confidence, leading to sustained economic growth through increased foreign investment. Implications to Theory, Practice and Policy: Institutional theory, risk theory and eclectic paradigm may be used to anchor future studies on assessing the influence of political stability on foreign direct investment (FDI) inflows in Nigeria. In practical terms, businesses and investors should focus on strengthening political institutions to create a stable and predictable environment. Policymakers play a crucial role in creating an environment conducive to FDI by prioritizing the implementation of political reforms that enhance stability. Ensuring free and fair elections, protecting civil liberties, and promoting effective governance structures are vital steps in this direction.

Economic upgrading of Central and Eastern European economies through global value chain participation and foreign direct investment

ABSTRACT This paper links global value chain (GVC) integration and operations of multinational enterprises (MNEs) in the context of host economies upgrading. Economic upgrading is referred to as higher exported value added that has been generated in the domestic economy as a result of foreign direct investment (FDI). Particular attention is paid to the impact of GVC on selected Central and Eastern European (CEE) economies. An econometric model is estimated using panel data of 44 sectors for four CEE economies over the period 1995–2018. A primary source of data is the latest edition of the TiVA (Trade in Value Added). The most important variable in explaining domestic contribution to GVC was the flow of foreign inputs. Backward linkages are crucial for building the GVC presence of the economies. The variables of interest – FDI stocks and flows – have in general a negative impact on the level of domestic content in analysed economies.

The Impact of Foreign Direct Investment Inflow on the Socio-Economic Upgrading of Nigeria

The research determined if the inflow of foreign direct investment has a significant impact on the socioeconomic upgrading of the Nigerian economy. Standard of living and job creation served as measures of socioeconomic development. The methodology adopted involved the use of multiple regression analysis to assess secondary time series data from 1996 to 2020 sourced from the World Bank. The study revealed that foreign direct investment inflow has a positive effect on both employment generation and standard of living. The impact on job creation was significant while that on standard of living was weak. Thus the research was able to establish a positive relationship between foreign direct investment and socio-economic development in Nigeria. It was recommended that institutional frameworks be established and supported to enable foreign investors to operate profitably in the Nigerian economy. Another suggestion was for foreign firms operating in Nigeria to be given tax incentives to augment their ability to serve as engine of socio-economic enhancement of the host economy. Finally, the Nigerian government should tackle the problems of insecurity and inflation to foster macroeconomic stability, thus attracting the inflow of foreign direct investment.

The Effect of the Auditor’s Confirmation of Firms’ Disclosure of Political Instability Management on the Decision to Invest in Stocks

This study aims to investigate the impact of geopolitical, financial, and human factors on foreign direct investment flows. The results revealed that the reality of foreign direct investment explains the political, financial, and human factors, in varying proportions, with significant significance. The positive impact of each of them is on controlling corruption. Governments use foreign direct investment activity as a main tool for growth and development. State and local governments are often responsible for attracting foreign direct investment, and foreign investors prefer countries that enjoy stability and have predictable investment environments by providing clear standards for dealing and having predictable legislation and regulatory parties in which the negotiating parties are clear, and that The absence of clear parties for implementation regarding ownership, taxes, dispute settlement, and instructions, so the investor is afraid of interfering with burdensome administrative resources and unpredictable laws and instructions Keywords: Auditor’s Confirmation – Disclosure – Political Instability – investment Decision.

The Effect of Inward and Outward FDI on the Unemployment Rate of Developing Countries

Purpose - This study empirically analyzes the relationship between inward and outward FDI and unemployment. Specifically, we examine the effects of foreign direct investment (FDI) inflows and outf lows on the unemployment rate using panel data from 68 developing countries from 2012 to 2021. Design/Methodology - Using a dataset of 68 developing countries from 2012 to 2021 which was analyzed by the system GMM method. Findings - The results show that inward FDI is positively related to the unemployment rate, while outward FDI is negatively related to it. We further examined the effect of inward and outward FDI on the unemployment rate by education level. By dividing the unemployment rate by the education level, the relationship between FDI and unemployment was closely analyzed. Originality/value - This finding of this study highlights the significance of considering the educational level of workers when analyzing the relationship between both inward and outward FDI and unemployment rate in developing countries.

Navigating Socio-Economic Forces: Understanding FDI Patterns in OECD Economies

This study investigates the FDI patterns’ ecosystem within the OECD regions. The goal is to understand the multifaceted interaction of socio-economic mechanisms driving such patterns. Using a quantitative survey that incorporates patterns of the past and dynamics of the present, the research paper discusses the role that FDI flows in OECD countries have played throughout history. The way study employs OECD data, national data, as well as relevant international institutions such as the UNCTAD and the World Bank is the methodological framework. The analysis of both qualitative and quantitative data underpins the study through the methodology which pays particular attention to the correlation analysis, linear regression, and multiple regression within its framework. The research paper was based on a sample of 38 economically diverse OECD member states and looks into what factors promote foreign direct investment inflows and outflows, and what these could be, for instance, the economic size, level of industrialization, and how the trade is shared across regions. Besides, the study also points out some areas that would be worthy of adding to the list of questions to explore, for example, digital transformation, its impact on the trends of FDI, and the significance of FDI in regional economic integration. These results point to the fact that study should pay more attention to emerging socio-economic conditions and research have to adapt them when designing the policies and future strategies within the framework of international economic relations.

Symmetric and Asymmetric Response of the Renewable Energy Market to Indonesian Economic Trends

This study digs into the complex interplay between renewable energy market development and Indonesian economic trends. Our rigorous study aims to investigate the impact of crucial economic indicators, including gross domestic product (GDP), exchange rates, inflation, real interest rates, net inflow of foreign direct investment (FDI), and urbanisation, on the renewable energy landscape in Indonesia between 1973 and 2022. This study provides a novel insight by investigating both symmetric and asymmetric impacts in the context of Indonesia. While previous studies have limited scope with linear relationships, this study fills a gap by capturing the dynamic interplay between renewables and economic indicators. By employing a robust econometric model, we reveal interesting patterns highlighting the multidimensional nature of the renewable energy market's responses to economic trends and find that there is a long-term interplay among the variables under linear and non-linear models. We found empirical evidence indicating that the nexus is asymmetric. However, in the long term, GDP exhibits an asymmetric positive impact on renewable energy consumption in the linear model. This shows that economic growth positively correlates with Indonesia's adoption of sustainable renewable energy sources. Similarly, urbanisation shows a positive response, with expanding cities boosting demand for cleaner and greener energy. Surprisingly, exchange rates show an asymmetric response, demonstrating that depreciation of local currency has a disproportionate negative impact on renewable energy investment during economic downturns. Inflation also exhibits a negative asymmetric response due to eroding purchasing power that reduces investment in renewables. Meanwhile, net inflow of FDI emerges as a critical driver in favourable economic conditions, dramatically amplifying renewable energy capacities. Therefore, during economic recessions, FDI’s impact diminishes and emphasises the significant importance of tailored interventions. Based on the findings of this study, which demonstrate the profound interplay of how the Indonesian economy shapes and is affected by the renewable energy market, we encourage the adoption of policies that promote sustainable energy development while increasing economic resilience. We recommend that policymakers support renewable energy diversification to lessen the vulnerability of exchange rate fluctuations. Attracting FDI is also crucial, as policies can help strengthen the investment climate and bolster the renewable energy sector. Inflation-indexed incentives can help maintain confidence and foster economic growth.

Long-term Impact of FDI-Corruption Interaction on Domestic Investment in Nigeria

Over the past three decades, Nigeria has experienced unstable domestic investment and foreign direct investment inflows, and the country continues to face rising corruption and related problems. An ARDL technique has been adopted to explore the long-term FDI’s impact on domestic investment including evaluating if the FDI-domestic investment nexus is dependent on the control of corruption in Nigeria over this period. The bounds test result shows an evidence of a long-term relation amongst FDI, domestic investment and corruption control (including GDP per capita, lending rate, exchange rate and oil price). We find that increasing inward FDI reduces (crowd-out) domestic investment and greater corruption control (lowering corruption) leads to a higher domestic investment in Nigeria over the long-term. Also, the influence of FDI on domestic investment depends on (or varies with) the control of corruption. FDI crowd-in domestic investment at greater corruption control than at lesser corruption control in the long-term. Other significant long-term influencers of domestic investment are the exchange rate and oil price. Given these outcomes, the study offers some recommendations to boost domestic investment in Nigeria.