Rise Of Foreign Direct Investment Research Articles

Factors affecting foreign direct investment in ASEAN

This study examines the changes in trade openness, gross domestic product (GDP), and foreign direct investment (FDI) in ASEAN from 1999-2022, analyzing how trade openness and GDP impact FDI. Using geographic data and descriptive statistics, the study employs the Panel Fully Modified Least Squares (FMOLS) method. The analysis reveals that since 1999, trade openness in ASEAN has generally increased, driven by trade liberalization, international trade agreements, and infrastructure development. However, there have been occasional declines due to specific events. GDP has also consistently risen due to increased FDI, trade openness, and infrastructure improvements, transitioning the ASEAN economies from agriculture to manufacturing and services, leading to more global exports. FDI has shown continuous growth, supported by trade openness and infrastructure development, which have enhanced the region's attractiveness for investment. The study finds a positive relationship between trade openness, GDP, and FDI in ASEAN. A 1% increase in GDP leads to a 5.27% rise in FDI at a 1% significance level, while a 1% increase in trade openness results in a 2.62% increase in FDI at a 5% significance level.

Globalization and Income Inequality in Developing Economies: A Comprehensive Analysis

Around the world, people are becoming more and more worried about how globalization will affect their standard of living. According to the literature, globalization has resulted in the marginalization of the impoverished populations in developing economies and has exacerbated inequality, while the opposite may also be true. The objective of this study is to investigate the impact of globalization on income inequality. The study used two-stage least squares (2SLS) to study the influence of globalization on income inequality in 18 developing countries from 1991–2021. Utilizing the KOF index of globalization, it is determined that globalization, together with its three aspects, has a negative effect on income inequality among developing economies. Evidence demonstrates that the combination of trade openness and foreign direct investment (FDI) plays a significant role in reducing inequality among developing economies. We recommend developing economies actively support globalization in terms of trade and FDI in accordance with the findings. By expanding trade opportunities and opening up markets, globalization can benefit developing nations. This may result in a rise in FDI, the creation of jobs, and technological developments. Governments can contribute to raising the living standards of their inhabitants, lowering rates of poverty, and closing the income gap by promoting globalization. Although the study emphasizes the well-established link between globalization and income inequality, it focuses on the effects of various globalization dimensions, emphasizing the need to comprehend how different dimensions of globalization, namely economic, political, and social globalization affects inequality in developing economies.

Role of foreign direct Investment and political openness in boosting the eco-tourism sector for achieving sustainability

This study aimed to examine the impact of China’s political openness index and foreign direct investment on its ecotourism index from 1985 to 2019. The findings revealed that a 1% rise in foreign direct investment had a long-term effect, increasing China’s sustainable tourism index by 0.01%. Furthermore, the political openness index played a significant role in boosting ecotourism in China over both short and long periods. A 1% increase in the political openness index corresponded to a 0.32 and 0.53% increase in China’s ecotourism index in the short and long term, respectively. Additionally, the financial openness index had a positive impact in the short and long term, with a 1% improvement resulting in approximately 0.24 and 0.23% increases in China’s ecotourism index. Key policies to advance eco-tourism in China include ensuring political stability, enhancing green financial markets through fintech and blockchain, and implementing poverty alleviation measures.

Taxes, regulations, and the value of U.S. corporations: A reassessment

This paper reassesses the conclusions of McGrattan and Prescott (2005), which derived the quantitative implications of growth theory for U.S. corporate valuations. In addition to having two more decades of data, the analysis incorporates recent changes in policies that affect corporate investments, taxes, and legal-form choice. Secular trends identified in the earlier period remain, with little change in the tangible capital-output ratio or profit share of output. Corporate valuations remain high relative to the postwar average, in line with the theoretical prediction. Critical to this prediction are the decline in effective tax rate on distributions and the rise of foreign direct investment abroad. With the recent enactment of the Tax Cuts and Jobs Act, corporate valuations are predicted to rise even further relative to GDP.

Regional Distribution of Foreign Direct Investment in India

The tremendous rise in Foreign Direct Investment (FDI) inflows following the economic reforms in 1991, has been one of the most prominent features shaping the behavior of the Indian economy in the past three decades. The present study is based on secondary data and the objective is to examine the trends in FDI inflows to India following the global financial crisis, for the period 2009-2010 to 2021-2022. Additionally, the distributional pattern of FDI among the regions and states of India is also analyzed, using the data for 30 states/territories. The results reveal that total FDI inflows have increased in substantial amounts over the period from US$ 37,745 million in 2009-2010 to US$ 84,835 million in 2021-2022. Maharashtra and Karnataka have surpassed all other states in FDI equity inflows over the period from October 2019 to September 2022. These two states have commanded 50 percent of the total FDI, whereas the regions in central, eastern, and northeast India have received less than 3 percent of the total FDI equity inflows. Thus, the regional disparities in the distribution of FDI are quite visible post-analysis. It is suggested that government should focus on making investor-friendly policies to tap the potential of regions neglected by foreign investors.

Foreign Capital Inflow, Exportability and the Indian Economy

The article investigated the effect of foreign direct investment (FDI) on Indian exports using aggregate and disaggregate data to capture macro- and micro-channels. India registers a steady rise in FDI during 1980–2018 in absolute terms but not in terms of GDP share. At the aggregate level, FDI is found to have significantly influenced Indian exports (both manufacturing and services) during 1980–2018 by suppressing its adverse effect on currency appreciation. Even at the firm-level analysis using the World Bank Enterprise Survey database, it is evident that higher participation of foreign ownership, a proxy of FDI measure, seems to have encouraged their export decisions. However, more than 50% of the capital inflows are received from two three countries which is also on limited service-related activities. The lower FDI share on manufacturing has limited the export rise. JEL Codes: F16, L11

‘Adversely Incorporated yet Moving up the Social Ladder?’: Labour Migrants Shifting the Gaze from Agricultural Investment Chains to ‘Care Chains’ in Capitalist Social Reproduction in Senegal

In Senegal, the growth of horticulture has been particularly rapid in the last decade or so, partly coinciding with the 2007–2008 ‘land rush’ and a boom in agricultural investment. This article analyses the implications of the rise in foreign direct investment (FDI) in the horticultural sector in northern Senegal. Specifically, it examines FDI’s effects on labour migration and the social reproduction of rural classes of labour through an intersectional feminist and gendered lens. It argues that invisibilised ‘care chains’ that overly burden women, and communities of solidarities, play a crucial role in the social reproduction of horticultural workers, most specifically migrant workers, and provide a subsidy to agrarian capital. Yet, capitalist development does not always translate to better wages and more inclusive laws and policies for horticultural wage workers and providers of caring labour who are adversely incorporated in these political economies. As a result, this requires further attention from policy-makers and political leaders. Using a combination of working-life histories and survey data gathered through two rounds of fieldwork over two years, and secondary data from relevant databases, this article focuses on the River Valley Region and Louga to analyse the emerging challenges of labour migration, social reproduction and caring labour in rural Senegal.

A nexus between renewable energy, FDI, oil prices, oil rent and CO2 emission: panel data evidence from G7 economies

AbstractVolatile energy prices, supply chain vulnerability and ecological implications of depleting fossil fuels have obligated the nations to swap carbon energy resources with sustainable and consumption energy choices. The study aims to investigate the sustaining connection of renewable energy consumption with trade openness, oil rent (OR), oil prices (OP) and carbon dioxide emissions of the G7 nations over the period 1971–2019. Using FMOLS and DOLS approach to panel data for analysing the long‐run elasticity, and SUR for estimating the short‐run elasticities. The analysis outcomes suggested that in the long run, a rise in Foreign Direct Investment (FDI) incursion and OP and OR are found to be major drivers of renewable energy consumption. The long‐term elasticity was estimated from a panel co‐integrated FMOLS and DOLS model are mostly alike and present an encouraging association among different variables. Surprisingly, the average number of years to return to equilibria turned out to be 16 years, which is precisely in line with the voluntary commitment by G7 for overall net‐zero electricity emission by 2035. The findings reported in the study suggest the oil‐producing countries should be compensated to diversify energy production. Higher OR is desired to further strengthen the renewable energy generation and consumption as implied by the findings reported. FDI may also further be welcomed in greener know‐hows for sustainable green energy choices.

Foreign Direct Investment and Economic Growth: Does Gross Fiscal Formation and Trade Openness Matter?

The currents study has examined the relationship between foreign direct invest and economic growth. In addition to that the study has also examined the role of gross fixed capital formation in fostering economic growth. The study has used the data of 28 years from the period starting from 1991 to 2018. In the study, panel data estimates were used, and the most reliable results from the diagnostic test came from the fixed effect model. The technique of estimate based on panel data is the one that works well for this kind of inquiry. Panel data is desirable because it can account for and even minimize individual variation, providing lower collinearity across variables and more degrees of freedom, as well as uncover and quantify consequences. Panel data is also advantageous since it can discover and quantify causes. At the 95% confidence level, the panel unit root test reveals that all variables are stationary. This conclusion is based on the results of the test. A supplemental estimate may be obtained through the use of the fixed effects model. All of the variables that were put through their paces were found to be stable and significant at the 5% level of significance. If the Hausman test is carried out, it is generally agreed that the model with fixed effects is superior to the model with random effects, which is its counterpart. According to the results of the model with fixed effects, every variable has a significant and favorable association with GDP. A rise in foreign direct investment (FDI) is correlated with an increase in commercial activity and the formation of more stable forms of capital, both of which may drive GDP growth. GDP may be increased by a variety of means, including gross fixed capital creation, foreign direct investment, and openness; hence, each of these may also contribute to economic growth. It has been shown that there is a positive correlation between each model variable and GDP.
 

ICT Diffusion, Foreign Direct Investment and Inclusive Growth in Sub-Saharan Africa

This study examines the joint effects of ICT diffusion (composed of access, usage and skills), and foreign direct investment (FDI) on inclusive growth in sub-Saharan Africa (SSA). The study draws on data from the World Bank’s World Development Indicators, and the Global Consumption and Income Project for the period 1980–2019 for the analysis. The study provides evidence robust to several specifications from the ordinary least squares and dynamic system GMM estimation techniques to show that: (1) unconditionally, both FDI and ICT diffusion induce inclusive growth in SSA; (2) compared to its direct effect, ICT diffusion is remarkable in fostering shared growth in SSA in the presence of FDI, and (3) relative to ICT access and ICT usage, ICT skills is more effective for enhancing inclusive growth in SSA. Overall, FDI modulates our ICT dynamics to engender positive synergy effects on inclusive growth. Policy recommendations are provided in line with the implementation of the African Continental Free Trade Area (AfCFTA) Agreement and the projected rise in FDI to SSA from 2022.

Impact of foreign direct investment on the haze pollution in various cities: Evidence from China

AbstractThis study employs panel data of 270 Chinese cities at the prefecture level or above from 2004 to 2018 to examine the impact of foreign direct investment (FDI) on urban haze pollution and its mechanism. The heterogeneity in FDI's impact in cities with different size, development level, government regulation level, the opening degree of the market, and government capacity is also investigated. The results show FDI exacerbates haze pollution in Chinese cities. At the mean value of the samples, a 1% rise in FDI would increase PM2.5 by approximately 0.0073%. These results remain consistent after we experiment several robustness checks. Then, analysis of mechanism suggests that FDI impacts PM2.5 via scale effect, composition effect and technological innovation effect. Finally, heterogeneity analysis further demonstrates haze pollution is more sensitive to the change of FDI in cities with low development level, cities with low market openness, and cities with weak government capacity. Further, it is worth stressing that FDI increases haze pollution in small‐, medium‐, and large sized cities, while it reduces haze pollution in mega cities and above. Moreover, the scale effect, composition effect, and technology effect of FDI in different cities are varied. Policy implications of our work are discussed.

Foreign Direct Investment and Economic Growth in South Africa: A Vector Error Correction (VEC) Model Approach

The objective of this research study was to examine the influence of foreign direct investment on economic growth in South Africa during the period 1994-2014. Time series annual data on real gross domestic product (GDP) growth, foreign direct investment, and terms of trade were sourced from the South African Reserve Bank (SARB) historical macroeconomic statistics online database. Unit root and cointegration properties of data were analysed using Augmented Dickey-Fuller and Johansen cointegration test techniques, respectively. The Vector Error Correction model was applied to compute long-run and short-run parameters of endogenous variables in the model. Results of the long-run section of the cointegrating equation show that for every 1 percent rise in foreign direct investment, there was a statistically significant rise in growth of gross domestic product by about 0.05 percentage points during the period 1994-2014. Results of the error correction component of the gross domestic product growth equation show that about 62 percent of the deviance from the long-run stability pathway was rectified in the first year after the deviation occurred. Results of the impulse response functions indicate that a one standard deviation in foreign direct investment had a statistically significant and positive effect on future gross domestic product growth after the first year. Keywords: Foreign direct investment (FDI), gross domestic product (GDP) growth, Vector Error Correction (VEC) model DOI: 10.7176/JESD/12-12-01 Publication date: June 30 th 2021

Dynamic Impact of Macroeconomic Variables on the Ecological Footprint in Malaysia: Testing EKC and PHH

The objective of this paper is to investigate the impact of economic growth (per capita real GDP), the square of per capita real GDP, energy use, financial development (FD), and foreign direct investment (FDI) on ecological footprint (EF) in the case of Malaysia over the period 1971–2014, by employing the ARDL approach. The long-run results revealed that economic growth has a significant positive impact on the ecological footprint and it implies that the economic growth deteriorates the environmental quality in Malaysia. Conversely, the square of GDP showed a negative and significant impact on the EF in the long run. As the coefficient of GDP in our study is positive and statistically significant while the coefficient of squared GDP is negatively significant, thus, this study supports the presence of the environmental Kuznets curve (EKC) hypothesis in the case of Malaysia. Furthermore, the result indicates that FDI has a positive and significant impact on the EF in the long run, which means a rise in FDI will enhance the environmental pollution level. Thus, it confirms the pollution haven hypothesis. Hence, it suggests that Malaysia imposes stricter environmental policies. Further, FDI and FD are causing GDP in Malaysia, but through increasing EF.

Investigation on the main contributors of economic growth in a dynamic heterogeneous panel data (DHPD) in Africa: evidence from their income classification.

In investigating the key contributors (electricity consumption, foreign direct investment, carbon dioxide emissions, and population) of economic growth in Africa, this study clustered the selected countries into their income levels spanning from 1990 to 2018. Applying the Westerlund bootstrap co-integration unveiled, the employed variables have a long-run equilibrium association. Estimates from the dynamic common corrected effects revealed that a 1% rise in electricity consumption increases economic growth by 0.187%, 0.040%, and 0.511% in upper middle income, lower middle income, and low middle income, respectively. The elasticity of carbon dioxide emissions to economic growth is high in low-income countries than in the other two groupings. In contrast, a percentage rise in foreign direct investment heightened economic growth by 0.919% and 0.154% in upper middle income and lower middle income. As the growth hypothesis was established among the panel groupings, it points out that a country's economy is energy dependent. Thus, a rise in electricity consumption in Africa will lead to a surge in economic growth since energy usage is a direct input into the manufacturing process and/or an indirect input that complements labor and capital inputs. However, its ripple effects of polluting the environment need not be overlooked. These findings imply that electricity usage and economic growth are highly corrected. These approaches consider cross-sectional reliance into consideration; thus, the empirical findings have drawn some significant policy implications.

ICT Diffusion, Foreign Direct Investment and Inclusive Growth in Sub-Saharan Africa

This study examines the joint effects of ICT diffusion (composed of access, usage and skills), and foreign direct investment (FDI) on inclusive growth in sub-Saharan Africa (SSA). The study draws on data from the World Bank’s World Development Indicators, and the Global Consumption and Income Project for the period 1980–2019 for the analysis. The study provides evidence robust to several specifications from ordinary least squares and dynamic system GMM estimation techniques to show that: (1) FDI and ICT diffusion and corresponding components (ICT access, usage, skills) induce inclusive growth in SSA; (2) compared to its direct effect, FDI is remarkable in fostering shared growth in SSA in the presence of greater ICT diffusion, and (3) compared to ICT access and usage, ICT skills are more effective in driving inclusive growth in SSA. Overall FDI modulates ICT dynamics to engender positive synergy effects on inclusive growth. Policy recommendations are provided in line with the implementation of the African Continental Free Trade Area (AfCFTA) Agreement and the projected rise in FDI in SSA from 2022.

RECENT TRENDS OF FOREIGN DIRECT INVESTMENT INFLOWS IN INDIA: AN ANALYTICAL REVIEW (2000-2019)

Foreign Direct Investment plays a very vital role in the development of the nation. Domestic capital is inadequate for the purpose of overall development of the country. Foreign capital is the way by which we can fill the gaps between saving and investment of domestic economy. In present scenario, Indian Economy is one of the most emerging economies of the world today. In the last two decades world has been extensive inflow of FDI into developing countries. Many developing countries are in competition with each other to attract FDI. Since 2014, India has emerged as of the top foreign destination in the world with a significant rise in FDI. Foreign Investment in India started back in 1991 after implementation of New Economic Policy. During 2000s, there is a big rise in Foreign Direct Investment in India. This paper focuses on secondary data based Sectoral Analysis of the inflow of FDI in India during 2000 to 2019. This paper also focuses on FDI policy framework, country-wise, equity wise FDI inflow in India.

FDI Inflows in India: An Analysis of the Trend During 2004–2018 and Future Projections for the Next Decade

Developing economies have been seeing an exhaustive rise of foreign direct investment (FDI) inflows all through the past two decades. Traditionally, India has pursued an enormously cautious approach; however, in 1991, India initiated the process of economic reforms towards a more open economy and got the sequence of processes to draw more FDI. The present study depends on the secondary data, and the time of the study is from 2004 to 2018. The FDI inflows have increased from US$5,777.8 million in 2004 to US$61,963.1 million in 2018. This article aims to present the descriptive analysis of FDI inflows in India during the selected period and also describes the long-term trend as well as the growth history of FDI inflows. The motivation behind this article is to make an effort to forecast the FDI Inflows in India for the coming years with the help of growth analysis, trend analysis and ARIMA (Autoregressive integrated Moving Average) forecasting. The result of future projections shows a positive trend indicating manifold increase in FDI inflows in India in the coming years.

Determinants of exchange rate volatility: empirical evidence for Turkey

Purpose- In the literature the effect of exchange rate volatility on various macroeconomic variables has been extensively studied but there are not enough studies about the reasons of exchange rate volatility. The aim of the research is to present the theoretical framework about the determinants of exchange rate volatility and to determine the factors affecting exchange rate volatility in Turkey for a period from 1974 to 2016. Methodology- In this research the stationary analysis of the series is determined by the Augmented Dickey Fuller Test (ADF) and the PP (Phillips-Perron test) unit root tests. In addition the GARCH model is used to calculate the real effective exchange rate volatility. The Johansen cointegration test is used to determine whether there is a long-term relationship between variables. The coefficients of the long-run relationship between the variables are estimated by the FMOLS method. Findings- The ADF and PP unit root test results show that the series are stationary at first difference. According to Johansen cointegration test results, it has been found that there is a long-run relationship between the variables involved in the analysis. Results from the FMOLS method for determining the direction and severity of the long-term relationship between the variables reveal that LGFCF, LMONEY and LTRADE positively affects significantly, while LFDI, LGDPC, LGGEXP negatively affects real effective exchange rate volatility. Conclusion- The rise in domestic investment (LGFCF), money supply (LMONEY) and trade openness (LTRADE) increases the real effective exchange rate volatility, while the rise in foreign direct investment (LFDI), output (LGDPC) and government expenditures (LGGEXP) also reduces the real effective exchange rate volatility.

Industrial proximity and vertical integration of multinational firms

PurposeWith the rise of foreign direct investment and global value chain, firms organize their plant allocation across countries to take advantage of production cost reduction opportunities and market access. The purpose of this paper is to investigate the production-supply strategies of Korean firms over foreign and domestic affiliates, using industrial proximity between Korean parent firms and their affiliates.Design/methodology/approachIn this paper first, using the Survey of Business Activities provided by Statistics Korea, the authors build a matching data set between a parent firm and each affiliate both in domestic and foreign countries. Second, the authors define their vertical relationship based on the input requirement coefficients of the Input-Output table (IO table). Furthermore, using the same IO table, the authors define the proximity for the pairs of the parent firm and the affiliates in domestic and foreign markets. Then, the authors test the relationship between the parent firm’s choice for foreign affiliate and their proximity index.FindingsThe main result shows that the stronger the industrial proximity between a final good producing firm and its input supplying affiliate is, the more likely the cross-border vertical integration is to be observed than the domestic vertical integration. Also, the authors find that the firms whose production structure accords the main result outperform and conduct more self-R&D and less R&D on trust than the other firms.Originality/valueThe finding is novel and original in a sense that the authors showed for the first time at firm-level microdata evidence that there is an optimal pattern of organizing supply chains within a multinational firm.

Foreign Direct Investment and Trade Components in Context of Pakistan

Objective of this paper was to evaluate the impact of foreign direct investment (FDI) on trade components (exports and imports) of Pakistan using annual data from 1975 to 2013. Engle and Granger two step cointegration method was used for conducting the analysis. This method was adopted because all the variables of interest were non stationary in level and stationary at first difference. Results provide evidence of long run cointegrating relationship as well as short run relationship between FDI and trade components. A rise in FDI causes both exports and imports to increase. Based on these empirical findings, we strongly recommend Government of Pakistan to focus on the strategy of investment liberalization as well as trade openness.