Foreign Direct Investment Outflows Research Articles

The Impact of FDI On Economic Growth: Evidence from Different Sectors and Economic Conditions

The objective of this study is to examine how the foreign direct investment (FDI) influence China's economic expansion and evaluate its diverse role in various sectors and economic circumstances. This study uses multiple regression panel data Fixed Effects models with the robust standard errors to investigate further the potential significant impacts of both FDI inflows and outflows on economic development in China. The study employs panel data from 29 provinces in China, spanning the period from 2003 to 2021 for its analysis. This study found that FDI inflow contribute significantly and positively on growth in three different sectors, while outflow of FDI shows insignificant but positively correlated with growth. The results of coefficients reveal that FDI inflow in secondary sector has the strongest impact on growth, followed by primary and tertiary sector. Additionally, by including crisis in the models, the positive and significant impact of FDI inflow remain unchanged with the domestic investment became significantly and positively affect the economic growth. Hence, this study recommends the policy makers to promote and encourage more foreign investors to invest in China by giving some incentives such as reduction in capital gains taxes and more subsidies to the domestic firms especially in secondary sector.

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

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

Net‐Zero Transition Pathways in Belt and Road Economies: Insights From Threshold Effects and Heterogeneous Analysis

ABSTRACTGiven the pressing need for economies to mitigate climate change and champion carbon neutrality, this study investigates the threshold effects of financial development and foreign direct investment (FDI) on carbon dioxide (CO₂) emissions in Sub‐Saharan Africa (SSA) within the Belt and Road Initiative (BRI) bloc, taking into account the moderating role of the regulatory environment. Drawing on the environmental Kuznets curve and the pollution haven hypothesis, the study utilizes the dynamic generalized method of moments (GMM) modeling, proposed by Arellano and Bover, to analyze panel data from 37 SSA countries spanning 1990–2022. The findings reveal that financial development in the banking, financial, and private sectors, along with FDI outflows, is associated with a reduction in CO₂ emissions. Conversely, FDI inflows are linked to increased CO₂ emissions. A curvilinear relationship is observed, where initial increases in financial development and FDI correlate with higher emissions, which decline beyond a certain threshold. Stronger regulations enhance the positive impact of financial development on reducing CO₂ emissions. Finally, the findings show a significant heterogeneous effect across the SSA regional blocs. These findings underscore the critical need for implementing stringent environmental regulations and promoting sustainable financial practices to mitigate negative environmental impact. This research provides both theoretical and practical insights into fostering a carbon neutrality agenda and advancing Sustainable Development Goal 13.

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.

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.

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.

Heterogenous Panel Modeling on Foreign Direct Investments in E7 Countries

With the spread of free economy conditions, the increase in the international mobility of capital has led to an increase in the number of economies that want to attract capital and the opportunities it will provide. In addition to this, capital owners have started to use free movement opportunities in order to maximize their own benefits. In this context, the factors affecting foreign direct investments including long-term capital flows have been the subject of many empirical studies. In this study which is carried out within the scope of the annual data of E7 economies for the period of 1992-2021, it is aimed to reveal the relationships between net foreign direct investment inflows and unemployment, liberal democracy, public expenditures, foreign direct investment outflows and short-term borrowing. In the study, in which the heterogeneous panel data method based on seemingly unrelated regression analysis was used, it was determined that the realizations under the influence of the selected independent variables differed by countries, but it was found that all the variables included in the analysis had a decisive role on foreign direct investment inflows.

SUSTAINABILITY ISSUES OF FOREIGN DIRECT INVESTMENTS IN AZERBAIJAN: IN TERMS OF DIVERSIFICATION

This research aims to analyze the correlations between the inflow of foreign direct investment and several macroeconomic factors in Azerbaijan. In order to examine the relationship between macroeconomic factors such as gross domestic product, export, import, and foreign direct investment outflow on foreign direct investment inflows, a multiple regression model was used. The study focused on the time period from the fourth quarter of 2010 to the fourth quarter of 2022. The study's results indicate that gross domestic product, imports, and outflow of foreign direct investment have a positive impact on foreign direct investment inflows. Conversely, exports have a negative impact on foreign direct investment inflows.

Monetary Integration Effects on Foreign Direct Investments in New EU Member States

This study examines the impact of accession to the Economic and Monetary Union (EMU) on foreign direct investment (FDI) inflows in the 11 New Member States (NMS), during the period 2005-2018. Using panel regression analysis and the gravity model, the influence of macroeconomic indicators on FDI outflows from 21 industrialised countries (including EU and non-European counties, such as Japan and USA) to the NMS is assessed. The empirical results suggest that favourable macroeconomic indicators in the NMS, such as a stable exchange rate, lower inflation, long-term interest rates and EU/EMU membership, are positively correlated with FDI inflows from NMS. Conversely, rising inflation and exchange rate volatility in the NMS are negatively associated with FDI inflows, while inflation in the FDI origin countries is positively correlated with investment in the NMS. The results suggest that joining the EMU has a statistically significant and positive relationship on FDI inflows to the NMS.

Capital Flight and Unemployment in Nigeria

This study examined Capital Flight and unemployment rate in Nigeria. Capital Flight was proxied by foreign direct investment outflows, external debt servicing, external reserves and capital and financial account deficits. Hypotheses that guided the study were formulated in line with the study objectives and relevant literature were reviewed and evaluated. Relevant data were extracted from the annual Statistical Bulletin and other issues, of the Central Bank of Nigeria. Unit root test was conducted using Augmented Dickey Fuller method which revealed that the variables were integrated at level and first difference necessitating the use of autoregressive distributive lag/bond test to explore the long run relationship existing among the variables in the model and the result showed that the variables in the model were co- integrated thus we proceeded in evaluating the long run as well as the co-integrating form in the model. From the result of the various tests, it was revealed that while some of the outcomes conformed to apriori expectations, others did not. Based on the findings from the analysis, the study recommended amongst others, that external debt acquired should be judiciously used for infrastructural development that would encourage investments which would ultimately bring about economic development as well as reducing the rate of unemployment in Nigeria.

FDI flows and sudden stops in small open economies

Why are balance of payments crises, characterized by Sudden Stops of capital inflows, more frequent in emerging economies than advanced economies? This paper argues that differences in the composition of the financial account flows explain 30 percent of the gap in the probability of a crisis. I document that although advanced economies have, on average, zero net foreign direct investment (FDI), they have sufficient FDI outflows to act as buffer savings during financial distress. To quantify the effect of this FDI channel on the probability of a crisis, I propose a small open economy model with a loan-to-value collateral constraint and FDI vulnerable to government confiscation risk. The calibrated model suggests that if an emerging economy increases its capital-to-GDP ratio and eliminates government confiscation risk, it would reduce the probability of a Sudden Stop from 2.9 to 2.7 percent, while simultaneously increasing its debt-to-GDP ratio from 47 to 65 percent.

Моделювання впливу прямого іноземного інвестування на економічний розвиток країн

The article examines the impact of foreign direct investment (net inflows, net outflows) on the economic development of countries with an emphasis on modeling this impact through the gross domestic product (GDP) indicator. The aim of the study is to develop econometric models that allow to quantify the contribution of foreign direct investment (FDI) to the economic development of countries, in particular Ukraine, the countries of the European Union and the world. To achieve the aim of the study, the methodology of correlation and regression analysis was used, which made it possible to identify the relationship between FDI and the economic development of countries, to assess the significance and efficiency of foreign investment. Paired linear regression equations have been built, the significance and quality of the parameters of econometric models have been checked, in particular, the values of the correlation and determination coefficients have been calculated, and the relationship between the resulting features and dependent variables has been assessed. With the help of the Student’s t-test, conclusions are made to confirm the statistical significance of the model regression coefficients, and through the F-test, the statistical reliability of the regression equations is verified. An analysis of the impact of FDI on the GDP of Ukraine, the EU and the world revealed significant differences in the relationship between these economic variables, which can be explained by different economic and structural features. The greater impact of FDI on Ukraine’s GDP compared to the EU and the world is due to the economic structure, the level of investment attractiveness, the need for external capital and vulnerability to external shocks. It is found that a significant part of Ukraine’s GDP depends on foreign investment, which stimulates economic growth by creating new enterprises, jobs and increasing productivity. The outflow of FDI from Ukraine has a direct impact on the economic stability and investment attractiveness of the country. The article emphasizes the need for a systematic approach to modeling the impact of FDI on GDP, which will contribute to more effective economic development and stability of countries. The results of the simulation can be useful for governments, enterprises and investors in the formation of strategies for attracting and managing foreign investment.

National income accounting attributes and economic welfare. Evidence from Pakistan.

Economic welfare is essential in the modern economy since it directly reflects the standard of living, distribution of resources, and general social satisfaction, which influences individual and social well-being. This study aims to explore the relationship between national income accounting different attributes and the economic welfare in Pakistan. However, this study used data from 1950 to 2022, and data was downloaded from the World Bank data portal. Regression analysis is used to investigate the relationship between them and is very effective in measuring the relationship between endogenous and exogenous variables. Moreover, generalized methods of movement (GMM) are used as the robustness of the regression. Our results show that foreign direct investment outflow, Gross domestic product growth rate, GDP per capita, higher Interest, market capitalization, and population growth have a significant negative on the unemployment rate, indicating the rise in these factors leads to a decrease in the employment rate in Pakistan. Trade and savings have a significant positive impact on the unemployment rate, indicating the rise in these factors leads to an increase in the unemployment rate for various reasons. Moreover, all the factors of national income accounting have a significant positive relationship with life expectancy, indicating that an increase in these factors leads to an increase in economic welfare and life expectancy due to better health facilities, many resources, and correct economic policies. However, foreign direct investment, inflation rate, lending interest rate, and population growth have significant positive effects on age dependency, indicating these factors increase the age dependency. Moreover, GDP growth and GDP per capita negatively impact age dependency. Similarly, all the national income accounting factors have a significant negative relationship with legal rights that leads to decreased legal rights. Moreover, due to better health facilities and health planning, there is a negative significant relationship between national income accounting attributes and motility rate among children. Our study advocated the implications for the policymakers and the government to make policies for the welfare and increase the social factors.

The Impact of Institutional Performance and Environmental Sustainability on Foreign Direct Investment in Pakistan

In the context of Pakistan, this study aims to investigate how environmental sustainability, institutional performance, financial inclusion, and economic growth interact with and affect foreign direct investment .to determine if there are substantial causal linkages or correlations between these factors, as well as how these independent variables affect FDI inflows and outflows in Pakistan. The study also intends to offer insights on how individuals and governments may support FDI in the Pakistani setting. The research uses time-series data collected from 1997 to 2022 from the (ICRG) and (WDI) .It uses NARDL modelling to analyses the dynamic relationships between FDI, environmental sustainability, institutional performance, financial inclusion, and economic growth in the context of Pakistan. Unit root tests are used to evaluate each factor's stationarity. It seeks to clarify the short- and long-term correlations between these factors by doing this. The NARDL approach reveals substantial discrepancies in the connection among independent variables and foreign direct investment. The study finds connections between FDI and the selected independent variables that are both short- and long-term with positive and negative shocks. Foreign direct investment (FDI) benefits from institutional performance and economic development in both the short and long run, although it is less immediately influenced by financial inclusion and environmental sustainability. This highlights not just the need for more research to explore the collateral advantages of sustainability and financial inclusion, but also the necessity of supporting institutions and economic growth to attract foreign direct investment. To attract more foreign direct investment, Pakistan may really promote measures that support economic growth and institutional effectiveness. This adds to the body of scholarly research and offers useful advice to stakeholders and policymakers who want to maximize FDI inflows while fostering inclusive and sustainable economic growth in Pakistan.

The impact of the US–China trade war on Taiwanese firms' R&D investment and outward investment to technologically advanced countries

Purpose The purpose of this paper is to understand the impending relationship between the impact of the US–China trade war on Taiwanese firms' spending on R&D and their offshore investment in technologically advanced countries (TAC), the authors examined if changes in these firms' R&D ratios and the growing presence of skilled workers in Taiwan's labour market during the trade war have affected their offshore investments in TAC.Design/methodology/approach Using a model built on pooled cross-sectional time-series data from 2012–2019, the authors examined whether a change in R&D ratios of domestic firms in Taiwan and the growing presence of skilled workers in Taiwan's labour market have affected the offshore investment by these firms during the trade war. Using data from the Manpower Utilisation Survey, the authors applied differences–in–differences–in–differences and differences–in–differences–in–differences–in–differences estimation methods and found that the trade war indeed gave a boost to Taiwan's job market, particularly for skilled workers.Findings From the estimation results, the authors noticed a rise in employment opportunities alongside a decline in the earnings of skilled workers in industries where more firms have spent on R&D as well as invested in offshore operations. However, firms in Taiwan that had not heavily spent on R&D from industries where investment in foreign operations was otherwise high have also attracted skilled workers during the trade war.Practical implicationsAn in-depth analysis of the impact of the trade war on domestic firms' spending on R&D and their investment in offshore operations in TAC should be helpful to policymakers interested in understanding the effects of the trade war and subsequent changes in firms' spending on R&D on labour market outcomes. If changes in the R&D ratios and a steady supply of skilled workers influenced the outflow of Foreign Direct Investment (FDI) to TAC, this insight could be helpful for those devising policies and measures to curb the impact of the trade war on domestic spending on R&D.Originality/value The study findings not only provide broad lessons to policymakers in Taiwan, but the country case study can guide growing economies that are equally careful while perceiving trade war as a significant deterrent to domestic R&D spending and the outflow of FDI.

South Africa’s interest rate behaviour: Investigating the influence of the indicators of financial openness

This study seeks to investigate the influence of financial openness variables on South Africa’s interest rate during the period between1980-2020. The study used both Augmented Dickey-Fuller (ADF) and Philip-Perron (PP) tests to determine the order of integration of the variables, while the autoregressive distributed lag (ARDL) bounds test was used to investigate both the short and long-run impact of the independent variables on the dependent variable. The findings of the study revealed that in the short-run both foreign direct investment (FDI) inflows and FDI outflows impacted the interest rate positively. However, portfolio investment, exchange rate and capital account openness did not have any significant impact on interest rate within the duration of this research. The long-run results revealed that FDI inflows had a positive and significant impact on interest rate. Also, while capital account openness had a significant and positive impact on the interest rate, FDI outflows, portfolio investment, and the exchange rate had no significant impact on interest rate. The study concludes that apart from portfolio investment which did not exert significant impact on interest rate, other financial openness indicators used in the study had a significant impact on South Africa’s domestic interest rate. The paper argues that, appropriate monetary policy measures targeted to lessen the monetary impact of excess capital inflows should be considered. Additionally, capital account liberalization policy should be encouraged, but it needs to be regulated if it places an excessive amount of liquidity pressure on the economy.

Effect of FDI Net Inflow on the GDP growth rate: 1990-2021

Purpose: This study examines the impact of foreign direct investment (FDI) on the gross domestic product (GDP) growth rate in Nigeria from 1990 to 2021. Research methodology: This study employed time-series data from the World Bank’s World Development Indicator Database to ensure data homogeneity. The data were assessed for stationarity using the ADF unit root test. All the data were stationary after the first difference. The hypothesis was tested using ordinary least squares (OLS) with BLUE properties. Results: The study finds a significant positive effect of foreign direct investment net inflow on GDPGR (p<.05). The control variables DEGO (p=0.3299) and INFL (p=0.3321) showed positive coefficients but were non-significant. Limitations: The study used only data from the Nigerian context, from 1990 to 2021, which affects the generalizability of the study findings to other countries in SSA, and a limited number of control variables, such as DEGO and INFL. Contribution: This study contributes to the literature on FDI’s impact of FDI on the economic growth of African nations. The research findings have critical policy implications for governments aiming to achieve sustainable economic growth. Practical Implications: This study has policy implications for developmental governance in Nigeria and SSA countries. Novelty: This study deviates from prior studies that agree that illicit financial flows in the form of FDI outflows negatively affect growth and focus on FDI net inflows’ beneficial impacts on the Nigerian economy.

Foreign Direct Investment Outflow and Securities Market Volatility in Nairobi Securities Exchange, Kenya

The study was undertaken to assess the effects of foreign direct investment on the securities market Volatility at NSE, Kenya. Although this topic has been the focus of financial studies, the relationship between foreign direct investment outflow and securities market volatility has not been completely analyzed. Global empirical research has produced conflicting results regarding how foreign direct investment affects the volatility of the securities market. The findings are contradictory, which calls for additional research to be done in the current study to determine how international capital outflow affects the volatility of securities traded at Kenya's NSE. The study utilized an explanatory research methodology and used secondary data to focus on the listed institution at the Nairobi Securities Exchange in Kenya. The impact of outflows of foreign direct investment on the volatility of the securities market over the research period was evaluated using the census technique. The analysis discovered a statistically significant positive link between foreign direct investment and GDP. According to the study's findings, the FDIO and SMV as represented by the NSE all share index had a favourable association. It means that adjustments to FDIO are probably going to have a noticeable impact on the volatility of the stock market. The study recommends that regulators should keep a close eye on the flow of FDIO leaving the Nairobi securities exchange market and to take precautions to prevent an excessive outflow from destabilizing the market and posing a risk to the stability of the capital market. Keywords: Foreign direct investment Cash flow, Nairobi Securities exchange security market volatility

Causality between Foreign Direct Investment Outflows and Economic Fragility: A Study on Eight Fragile Economies

Bu çalışmanın amacı, kırılgan sekiz ekonominin (Arjantin, Brezilya, Çin, Kolombiya, Hindistan, Güney Afrika, Tayland, Türkiye) doğrudan yabancı yatırım çıkışları ile ekonomik kırılganlık göstergeleri arasındaki nedensellik ilişkisini araştırmaktır. 1995-2021 dönemini kapsayan çalışmanın veri seti, doğrudan yabancı yatırım çıkışları ile ekonomik kırılganlık göstergesi olarak belirlenen; tüketici fiyat endeksi, merkezi hükümet borçları/gayrisafi yurt içi hâsıla, toplam rezerv/dış borç, M2/gayrisafi yurt içi hâsıla, cari işlemler dengesi/ gayrisafi yurt içi hâsıla, bankalar tarafından sağlanan yurtiçi özel sektör kredileri/ gayrisafi yurt içi hâsıla ve toplam borç/ihracat değişkenlerinden oluşmaktadır. Kónya (2006) tarafından geliştirilen bootstrap panel nedensellik analizi sonuçlarına göre; ekonomik kırılganlığı temsil eden değişkenler ile doğrudan yabancı yatırım çıkışları arasında nedensellik ilişkisi en çok Tayland’da, en az Çin’de görülmektedir. Araştırma sonuçları, ekonomik kırılganlık göstergeleri ile doğrudan yabancı yatırım çıkışları arasındaki nedensel ilişkinin yönü konusunda güçlü bir fikir birliği olmadığını göstermektedir. Çalışmanın bulgularına dayanarak her ülkenin kendi iç dinamiklerine uygun politika geliştirmesi önerilmektedir.

(Asymmetric) tariff‐driven foreign direct investment: Evidence from Korean firm‐level data

This study examines the effects of identified industry tariff shocks on firms' outward foreign direct investment (FDI) into their destinations. Using rich Korean firm‐level data for 2010–18, the study decomposes FDI outflows from multinational enterprises (MNEs) into the number of subsidiaries (extensive margin) and average FDI for individual subsidiaries (intensive margin) in the destination. New evidence of tariff‐driven FDI reveals that the tariff decrease shocks (TDS) (significant tariff decreases) lower the number of existing subsidiaries rather than the average FDI volume for the existing subsidiaries. In addition, more productive firms investing in developing countries lower the number of existing subsidiaries to a greater extent in response to TDS, implying that productive MNEs reallocate resources into selective core subsidiaries when a significant tariff decrease occurs.