Influence Foreign Direct Investment Inflows Research Articles

EXCHANGE RATE DYNAMICS AND THEIR IMPLICATIONS

This research paper explores the dynamics of exchange rate fluctuations and their far-reaching implications for the global economy. Exchange rates are pivotal in shaping trade balances, inflation, and capital flows, making them a critical factor for policymakers, multinational corporations, and investors. By examining both theoretical frameworks and empirical evidence, this study analyzes the effects of exchange rate movements on key economic variables such as inflation rates, gross domestic product (GDP), foreign direct investment (FDI), and international trade balances. The paper employs a combination of econometric modeling and historical data analysis to evaluate how these fluctuations have influenced emerging and developed economies over the past two decades. Results indicate that exchange rate volatility can lead to inflationary pressures in import-dependent economies, disrupt trade balances, and influence FDI inflows. The findings also underscore the importance of stable exchange rate policies to mitigate economic uncertainty. This study concludes with recommendations for future research, particularly regarding the influence of digital currencies and geopolitical tensions on exchange rate stability.

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.

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

Factors Influencing Foreign Direct Investments Inflow in Africa: A Case Study of Tanzania

Africa has emerged as an attractive destination for foreign direct investment (FDI) due to its rich natural resources, growing economies, and increasing political stability. The doors of Tanzania, one of the largest countries in Africa, have been opened to international companies in search of growing markets. Nevertheless, Tanzania has seen a low level of foreign direct investment (FDI) inflows, primarily because of its stringent policies restricting the ownership of businesses by foreign nationals. The aim of this study is to identify and explain the factors that influence FDI inflows in Tanzania, which is the country that will be the focus of the study. This study will concentrate on the independent factors of political stability, availability of natural resources, size of the economy, and transport infrastructure, as well as the dependent variable of foreign direct investment (FDI). To collect the appropriate information, five survey questions were developed for each variable. A total of 125 respondents were collected using purposive sampling. The findings of this study will inform policymakers, investors, and other stakeholders in the region about the factors that influence foreign direct investment inflows into Tanzania. The study examined the impact of transport and infrastructure, political stability, the scale of the economy, and the availability of natural resources on foreign direct investment (FDI) in Tanzania.

Impact of determinants on foreign direct investment in Saudi Arabia: A multiple linear regression analysis

Attracting foreign direct investment (FDI) is crucial globally, especially in developing economies. FDI brings in capital, boosts production, enhances infrastructure, generates employment, and fosters economic growth. This becomes particularly significant for Saudi Arabia in light of its Vision 2030 plan, which aims to elevate FDI to 5.7% of its GDP by 2030 (equivalent to $100 billion annually). This study delves into the primary factors influencing FDI in Saudi Arabia. Analyzing data from 2005 to 2021, we explore the effects of various factors, including market size, economic growth, inflation, income levels, export performance, trade openness, corruption levels, and government spending. Using multiple linear regression (MLR), we analyze these factors' impact on FDI. Our findings reveal four significant determinants. Market size, inflation rate, and trade openness positively influence FDI inflows, while GDP per capita (income) has a negative impact. Other variables studied did not show significant effects. These results can inform policymakers in formulating strategies to attract more foreign investment.

The Role of FDI in India's Manufacturing Sector: Growth, Challenges, and Opportunities

This research paper explores the pivotal role of Foreign Direct Investment (FDI) in the growth and transformation of India's manufacturing sector, with a focus on recent trends, challenges, and future opportunities. It highlights the positive impact of FDI facilitated by government policies, including the "Make in India" initiative, which aims to boost the country's manufacturing capabilities and position it as a global hub. The study underscores the significant contributions of FDI to enhancing production capacity, technological advancements, and job creation. However, it also identifies key challenges, such as regulatory hurdles and inadequate infrastructure, that continue to limit the sector's full potential. In the context of recent global economic shifts, including the impacts of the COVID-19 pandemic and evolving trade policies, the paper examines how these factors influence FDI inflows and the strategic positioning of India's manufacturing industry. According to recent data from the Reserve Bank of India, FDI inflows into the manufacturing sector increased by 15% in the fiscal year 2021-2022, reflecting the sector's resilience and continued attractiveness.1 The paper concludes with recommendations for policy reforms aimed at creating a more conducive environment for FDI, essential for the sustained growth and competitiveness of India's manufacturing sector.

Does business cycles influence FDI inflows- A case study of India

The present study investigates the dynamic association between foreign direct investment (FDI) inflows and business cycles in India. FDI plays a crucial role in fostering a nation's economic progress and promoting technical growth. Nonetheless, foreign investments also exhibit synchronous relationship with the business cycles, which are relatively more evident in the present uncertain times. Finding reveal that foreign investments in India have a countercyclical trend, meaning they tend to move in the opposite direction of the business cycle, both in the short and long term. Nevertheless, the immediate consequences of this countercyclical activity outweigh the long-term consequences.

Unravelling the Relationship between Governance Indicators and Foreign Direct Investment in Tanzania: An Empirical Analysis

Foreign Direct investment (FDI) is recognized as a significant source of capital inflows that can stimulate economic growth in developing countries. In order to attract and benefit from FDI, governments have implemented various economic reforms and focused on improving governance indicators. This study investigated the causality effect of governance indicators on FDI inflows in Tanzania. The governance indicators examined in this study include; rule of law, regulatory quality, government effectiveness, control of corruption, voice and Accountability, political stability and absence of violence. Before measuring the causality effect between the variables, a stationarity, test was conducted using the Augmented Dickey-Fuller (ADF) test. Then the Granger Causality Test was used to address two-way linkages between variables. The data used in the study was secondary quantitative time series data obtained from the World Bank Worldwide Governance Indicators and the Bank of Tanzania from 1996 to 2021. The findings suggested a long-run causality running from governance indicators to FDI inflows in Tanzania. In the short run, voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption individually influence FDI inflows. Furthermore, the Granger causality test indicates that voice and accountability and political stability and absence of violence Granger cause FDI inflows. The other governance indicators also exhibited significant causality with FDI inflows. These results call for policy makers in Tanzania to focus on strengthening governance framework, ensure accountability, enhance investor protection, ensure political stability, promote the rule of law and prevent corruption in achieving increased FDI for sustained economic growth.

PENENTU ALIRAN MASUK PELABURAN LANGSUNG ASING DI NEGARA-NEGARA ASEAN

Foreign direct investment (FDI) plays an important role in spurring economic growth and increasing employment opportunities. Therefore, it is very important to make a study regarding the factors that influence FDI inflows in the Southeast Asia (ASEAN) region. In addition, existing research has left certain questions unanswered, including whether open trade and corruption serve as a catalyst or barrier to FDI inflows. Based on previous empirical studies, it was found that the results of the decision were still not conclusive enough to be used as a reference by interested parties such as firms, shareholders, investors and governments. However, studies like this in ASEAN countries are still lacking. This study uses the Panel Autoregressive Distributed Lag (ARDL) methodology to analyze data from 2000 to 2021.

Do climate risks influence foreign direct investment inflows to emerging and developing economies?

ABSTRACT Foreign direct investment (FDI) inflows are considered to be an important source of private financing for several emerging markets and developing economies (EMDEs). However, the high susceptibility of these countries to climate change impacts vis-à-vis their developed counterparts may reduce their attractiveness as a favourable destination for FDI inflows. EMDEs with significant exposure to physical climate risks present a higher incidence of financial risks for foreign investors, which may in turn discourage them from locating themselves in such jurisdictions where their profitability and operations could be jeopardized by climate disasters. Given this context, we empirically investigate how physical climate risks influence FDI inflows to 68 EMDEs using data from over two decades, from 1995 to 2017. We contribute to an emerging body of literature that assesses the impact of climate risks on macro-financial variables by focusing specifically on FDI inflows. Although we abstain from making strong causal claims in our paper, we account for endogeneity concerns extensively and our empirical results show that higher climate risks adversely impact FDI inflows to EMDEs. However, we find these negative effects can be mitigated to a significant degree by strengthening financial sector development in the host country, as it increases their capacity to absorb some of these climate risks more effectively. Key policy insights Emerging markets and developing economies (EMDEs) that are more vulnerable and exposed to physical climate risks tend to be less attractive destinations for FDI inflows. Negative effects of physical climate risks on FDI inflows tend to be mitigated in EMDEs with a high degree of financial development. Well-developed, deep, and inclusive financial markets give EMDEs the capacity to absorb and manage various financial risks including those arising from climate change impacts.

THE EFFECT OF CORPORATE TAX POLICY ON FOREIGN DIRECT INVESTMENT: EMPIRICAL EVIDENCE FROM ASIAN COUNTRIES

The phenomenon of Corporate Tax Rate (CTR) reduction to attract Foreign Direct Investment (FDI) has been an interesting subject given the lack of consensus from empirical studies. This study aims to provide empirical evidence on the relationship between CTR and FDI, and examine factors that influence FDI inflows. Using data for 28 Asian countries from 1999 to 2014, we find that CTR has a significant negative effect on FDI inflows. FDI inflows increase by 4.38% due to a 1% CTR reduction. We also find that other economic factors, such as economic openness, market size, and exchange rates play an important role in attracting FDI inflows.

Does country risk influence foreign direct investment inflows? Evidence from Nigeria and South Africa

Does country risk influence foreign direct investment inflows? Evidence from Nigeria and South Africa

Global FDI inflows and outflows in emerging economies Post-COVID-19 era

FDI (Foreign Direct Investment) is frequently viewed as a critical measure of a country's economic strength and potential. Consequently, this paper investigates why countries attract FDI by utilizing factors and channels such as vertical or horizontal FDI as well as COVID-19’s impact on FDI flows in emerging economies with data from 1990 to 2020. Models of kinked exponential growth for estimating growth rates and the Andrew and Zivot trend formulations are used to analyze the rise in FDI inflows. The FDI inflow channels are estimated using dynamic panel data analysis, with a generalized method of moments for emerging economies as a whole and an autoregressive distributed lag-pooled mean group for specific countries. The countries studied were India, China, Russia, South Africa, and Brazil. Except for India, where the trend has accelerated, the rest of the nations in the emerging economies category has seen significant or minor declines. Overall, vertical and horizontal factors influence FDI inflows to emerging economies. However, estimations show that vertical and horizontal factors promote FDI inflow into the Russian Federation and India. China's horizontal motivation, on the contrary, is critical. Inflows of FDI into Brazil and South Africa appear to be unrelated. The pandemic scenario affects FDI in Brazil but not in other emerging economies. FDI determinants differ per country. In order to improve their economic situation following the pandemic, developing countries may establish adequate FDI policies to attract FDI.

Does Country Risk Influence Foreign Direct Investment Inflows? A Case of the Visegrád Four

The determinants of FDI inflows have been a subject of unremitting debate in the economic literature over the years. However, the role of country risk has received inadequate attention, especially in the context of the Visegrád countries, which comprise the Czech Republic, Hungary, Poland and Slovakia. Hence, this study examined whether country risk matters for FDI inflows into the Visegrád Four for the period 1991–2020. This study accounted for cross-sectional dependency, structural breaks and heterogeneous slopes in the panel of the four countries by employing the dynamic common correlated effect estimator. Additionally, country-wise fully modified least-squares regression was conducted for each country to test the robustness of the estimates. The empirical results revealed that country risk matters for the FDI inflows into the Visegrád countries, as it has a negative effect on the FDI inflows. Furthermore, both the overall panel and country-wise regressions established that economic and political risks are essential determinants of the FDI inflows, as both have a negative relationship with the FDI inflows. However, financial risk had weak and mixed impacts on the FDI inflows in the overall panel and country-wise regressions, respectively. These research outcomes highlight the need for appropriate macroeconomic and government authorities in the Visegrád economies to enhance the market capabilities of their economies by improving and upholding the social, institutional, corporate and macroeconomic structures, and as a way of achieving better country risk attributes.

The Nexus of Selected Macroeconomic Variables toward Foreign Direct Investment: Evidence from Indonesia

Foreign direct investment (FDI) inflows are a major instrument of economic growth in developing countries. Indonesia is one of the developing countries that has received more FDI with macroeconomic stability. The macroeconomic stability indicator is seen as an important factor in driving economic growth and attracting FDI inflows in Indonesia. Therefore, this study examines the relationship of selected macroeconomic variables toward the FDI in Indonesia over the period 1980-2019. Using Autoregressive Distributed Lag (ARDL), the empirical results showed that market size, domestic investment, government spending and foreign exchange rate are key factors influencing long-run FDI inflows. However, financial development revealed no relationship with FDI inflows in Indonesia. Overall findings indicated that macroeconomic variables influence FDI inflows. These findings guided policymakers in formulating new policies to ensure macroeconomic indicators' stability in driving economic growth.

Does population health influence FDI inflows into Ghana?

PurposeGhana is one of the countries instituting several measures toward attracting more Foreign Direct Investment (FDI) inflows. This is because, FDI is largely viewed as essential to socioeconomic development. However, while population health can influence FDI inflows, it has received very little attention. This study, therefore, investigates empirically, as to focusing on population health could be a useful tool in Ghana’s attempt to attract more FDI inflows.Design/methodology/approachThe study uses time series data on Ghana from 1980 to 2018 to achieve its objective. Life expectancy, death rate, infant mortality rate, under-five mortality rate and incidence of malaria are used as proxies for population health, while the Ordinary Least Square (OLS) and the Instrumental Variable Two-Stage Least Square (IV2SLS) regressions are employed as empirical estimation techniques.FindingsUsing the OLS regression, except the incidence of malaria, the study finds all the other population health indicators to significantly influence FDI inflows. However, after controlling for endogeneity using the IV2SLS regression, all population health indicators are found to be significant as regards their effects on FDI inflows.Practical implicationsPaying attention to population health could be an effective strategy that can be employed by policymakers in the quest to get more FDI inflows into Ghana.Originality/valueThis study, to the best of our knowledge, is the first study solely devoted to Ghana, which doing so helps in devising country-specific policies with regard to the effect of population health on FDI inflows. Further, this study becomes the first to use death rate, infant mortality rate and under-five mortality rate in examining the effect of population health on FDI inflows. Thus, since there are various causes of deaths, using indicators that capture deaths from all factors helps in giving a much broader picture with regard to the FDI population health nexus. Also, this study is the first to use up to five different population health indicators in examining the effect of population health on FDI inflows, which aids in revealing whether FDI is sensitive to the population health indicator used.

Trade policy space and foreign direct investment inflows

PurposeThis study aims to use a quantitative measure of trade policy space to investigate empirically whether trade policy space influences foreign direct investment (FDI) flows to countries.Design/methodology/approachThe empirical analysis covers an unbalanced panel data set of 158 countries, over the period 1995–2015 and uses the two-step system generalized methods of moments approach.FindingsThe results suggest that the impact of trade policy space on FDI inflows is positive and increases as countries enjoy greater trade policy space. Furthermore, advanced economies tend to experience a higher positive impact of trade policy space on FDI inflows than less advanced economies.Research limitations/implicationsThese findings highlight the relevance of trade policy space for countries’ FDI inflows.Practical implicationsThe analysis shows that non-trade related constraints to trade policy could reduce trade policy space and adversely influence FDI inflows, which are critical for countries’ economic growth and development.Originality/valueTo the best of the knowledge, this topic has not been addressed in the literature.

Determinan Aliran Masuk Foreign Direct Investment ke Negara-Negara Berpendapatan Rendah

Modal merupakan faktor penting yang mendorong pertumbuhan ekonomi dan pembangunan. Investasi asing langsung (foreign direct investment – FDI) adalah salah satu bentuk modal terbaik dalam pembiayaan dan investasi proyek industri. Oleh karena itu, adalah hal yang penting untuk mengidentifikasi faktor-faktor yang memengaruhi FDI dan untuk menentukan tingkat pengaruh masing-masing untuk membuat kebijakan yang tepat di bidang ini. Penelitian ini menganalisis faktor-faktor penentu FDI di negara dengan pendapatan per kapita rendah. Analisis didasarkan pada sampel dari 10 negara berpendapatan rendah. Dengan menggunakan model data panel, digunakan tiga pendekatan, yaitu common model, random effects dan fixed effects model, untuk mengidentifikasi faktor-faktor yang memengaruhi FDI di negara-negara ini. Hasil penelitian menunjukkan faktor-faktor yang berpengaruh secara signifikan terhadap aliran masuk FDI ke negara-negara dengan tingkat pendapatan rendah adalah PDB (ukuran pasar), inflasi, produktivitas tenaga kerja, infrastruktur, keterbukaan perdagangan, dan stabilitas politik. Sementara kualitas kebijakan dan peraturan tidak berpengaruh secara signifikan.

Institutions and FDI: evidence from developed and developing countries

This study investigates the impact of institutional quality on Foreign Direct Investment (FDI) inflows using panel data for low, lower-middle, upper-middle and high-income countries for the sample period of 1996–2016 using the system Generalized Method of Moments (GMM). The empirical results confirm that institutional quality has a positive impact on FDI in all group of countries. The magnitude of the coefficients of control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability for FDI inflows are greater in developed countries than in developing countries. We conclude that institutional quality is a more important determinant of FDI in developed countries than in developed countries. However, GDP per capita, agriculture value-added as a percentage of GDP, and inflation influence FDI inflows negatively in developed countries, while GDP per capita, trade openness, agriculture value-added as a percentage of GDP, and infrastructure have positive and statistically significant impacts on FDI inflows in developing countries. Trade openness as a percentage of GDP and infrastructure positively affect FDI in developed countries. From our analysis, we infer that institutional quality is a more important determinant of FDI in developed countries than in developing countries.

The Impact of Financial Sector Development on Foreign Direct Investment: An Empirical Study on Minimum Threshold Levels

Using panel data of 21 emerging economies, the paper investigates the financial sector development threshold levels that would influence foreign direct investment (FDI) inflows. The threshold levels we identified are 41.27% of stock market capitalization for stock market turnover, 53.55% of gross domestic product (GDP) for stock market value traded, 121.53% of GDP for stock market capitalization, 114.43% of GDP for domestic credit to private sector by banks, 144.06% of GDP for domestic credit provided by financial sector, 0.22% of GDP for outstanding domestic private debt securities and 41.26% of GDP for outstanding domestic public debt securities. Our results show that higher stock market and banking sector development above the threshold level positively and significantly influence FDI inflows whilst the influence of lower stock market and banking sector development on FDI inflows was weak and not significant. Levels of private bond market development equal to or greater than the threshold level are found to have a positive but non-significant impact on FDI inflows whilst private bond market development levels less than the threshold have a weaker positive and non-significant influence on FDI inflows. On the other hand, public bond market development levels equal to or greater than the threshold level negatively influenced FDI inflows whilst levels of public bond market development less than the threshold positively but non-significantly attracted FDI inflows into emerging markets.