Does foreign direct investment promote exports in China?

2017 ◽  
Vol 7 (2) ◽  
pp. 185-202 ◽  
Author(s):  
Xin Li ◽  
Hsu Ling Chang ◽  
Chi Wei Su ◽  
Yin Dai
Keyword(s):  
Foreign Direct Investment ◽  
Causal Relationship ◽  
Direct Investment ◽  
Structural Adjustment ◽  
Structural Changes ◽  
Time Varying ◽  
Causality Test ◽  
Full Sample ◽  
Content Type ◽  
Rolling Window

Purpose The purpose of this paper is to investigate the causal link between foreign direct investment (FDI) and exports in China based on the knowledge capital model (KK model, Markusen, 2002). Design/methodology/approach The bootstrap Granger full-sample and sub-sample rolling window causality test is used to determine whether FDI can promote exports. Findings The full-sample causality test indicates no causal relationship from FDI to exports. However, considering structural changes of exports and FDI, the authors’ find that the full-sample test is not reliable. Instead, the authors use the rolling window causality test to revisit the dynamic causal relationship, and the results present significant effects from FDI on exports, mostly around periods in which the proportion of FDI from Hong Kong, Macao and Taiwan is increasing. Specifically, positive impacts of FDI on exports are stronger than the negative impacts in China. Research limitations/implications The findings in this study suggest a significant time-varying nature of the correlation between FDI and exports. The promotion effect of FDI to exports is proved by the rolling window approach; it thus supports the KK model that divides FDI into lateral FDI and vertical FDI and proves that the constitution of FDI is critical to the relationship between FDI and exports. Practical implications China has been facing adjustment of its economic structure in recent years, and in this situation, increasing the proportion of FDI that can bring advanced production function is critical for the industrial structural adjustment. Originality/value This paper uses the bootstrap rolling window causality test to investigate the time-varying nature of the causality between FDI and exports, considering structural changes for the first time. The authors further deepen the previous research and draw a more realistic conclusion.

scholarly journals Short run causal relationship between foreign direct investment (FDI) and infrastructure development

2019 ◽  
Vol 17 (6) ◽  
pp. 1202-1221
Author(s):  
De-Graft Owusu-Manu ◽  
David John Edwards ◽  
A. Mohammed ◽  
Wellington Didibhuku Thwala ◽  
Tony Birch
Keyword(s):  
Foreign Direct Investment ◽  
Causal Relationship ◽  
Significant Relationship ◽  
Direct Investment ◽  
Negative Relationship ◽  
Estimation Method ◽  
Local Market ◽  
Infrastructure Development ◽  
Content Type ◽  
Short Run

Purpose Foreign direct investment (FDI) flows for infrastructure development have grown in volume to become more widely dispersed among home (outward investor) and host (recipient) countries. This paper aims to explore the short-run causal relationship between FDI and infrastructure development in the developing country of Ghana. Design/methodology/approach A two-stage least squares estimation method was adopted where FDI was endogenized, and all variables were in constant prices. Stationarity tests were performed on the annualized log difference of variables using augmented Dickey–Fuller test (ADF). Findings Results reveal a positive and significant relationship between FDI and infrastructure but a negative and significant relationship between FDI and GDP and FDI and openness. GDP growth also has a long-run negative relationship with FDI inflows. Originality/value The paper’s contribution to knowledge is two-fold. First, it examines the short run effect of FDI upon the Ghanaian economy and how market shocks to FDI and infrastructure development can be ameliorated. Second, it illustrates that government policymakers should prioritize development that requires FDI and ensure that the local market is not excessively open to foreign exploitation. Future work is required to further investigate international capital flow and its impact upon other developing nations.

scholarly journals Bank-Based Financial Development and Economic Growth: Time-Varying Causality Analysis for Egypt

2018 ◽  
Vol 10 (4) ◽  
pp. 123
Author(s):  
Amira Akl Ahmed
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Structural Breaks ◽  
Growth Time ◽  
Time Varying ◽  
Causality Analysis ◽  
Causality Test ◽  
Full Sample ◽  
Rolling Window ◽  
The Government

The bootstrap approach to Toda-Yamamoto (1995) modified causality test is applied in a rolling window of fixed size onto Egyptian data during 1960-2016 to examine time-varying links between economic growth (EG) and bank-based financial development (BBFD). Full sample results indicated the existence of unidirectional causality running from BBFD to EG, however; instability tests revealed the presence of structural breaks. Given the misleading inferences made using the full sample, the rolling window procedure is applied. Bidirectional time-varying causality between EG and BBFD was detected. Reasons behind declining the fraction of credit provided to private business sector to GDP in recent years include, mainly, credit crunch and expansion of credit to the government and partially to economic slowdown. Adoption of fiscal reforms and promotion of innovative financial tools suitable for the needs of small and medium-sized enterprises is highly recommended to enhance the role of banking system in promoting economic growth.

DOES RESERVE ACCUMULATION LEAD TO ENDOGENOUS MONEY SUPPLY IN CHINA?

2018 ◽  
pp. 1-16
Author(s):  
XIN LI ◽  
JIAO-JIAO FAN ◽  
CHI-WEI SU ◽  
ADELINA DUMITRESCU PECULEA
Keyword(s):  
Money Supply ◽  
Structural Changes ◽  
Settlement System ◽  
Causality Test ◽  
Full Sample ◽  
Significant Difference ◽  
Rolling Window ◽  
Reserve Accumulation ◽  
Sample Test ◽  
Endogenous Money

This study investigates the causality between reserve accumulation and money supply in China over the period of 2000:01–2016:11. The bootstrap Granger full-sample and sub-sample rolling window causality tests are utilized. The full-sample test supports that reserve accumulations lead to significant endogenous money supply. However, the sub-sample test suggests that the endogenous money supply caused by reserve accumulations mostly existed before 2007 when China implemented a compulsory exchange settlement system. Structural changes also exist as a result of the impacts of excess money supply and reserve accumulations, which suggests specific backgrounds should be taken in to account when investigating this issue. The rolling window causality test provides a more accurate result when considering structural changes, which proves reserve accumulations are more likely to cause endogenous money supply in a compulsory exchange settlement system. The significant difference before and after 2007 suggests that the ending of the compulsory exchange settlement system is helpful to improve the monetary policy independence.

Effect of Chinese foreign direct investment on economic growth in Africa

2017 ◽  
Vol 10 (2) ◽  
pp. 162-171 ◽  
Author(s):  
Isaac Doku ◽  
John Akuma ◽  
John Owusu-Afriyie
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Gdp Growth ◽  
Least Squares Regression ◽  
African Countries ◽  
Causality Test ◽  
Content Type ◽  
Quantitative Effect ◽  
Chinese Foreign Direct Investment

Purpose This study aims to examine the quantitative effect and direction of Chinese Foreign Direct Investment (FDI) on economic growth in Africa using a sample of 20 African countries from 2003 to 2012 with data obtained from United Nations Conference on Trade and Development and the World Bank. Design/methodology/approach The study used panel least squares regression, specifically fixed effect model to examine the quantitative effect of Chinese FDI on economic growth in Africa. The study also used Granger causality test to examine whether a causal relationship exists between economic growth and China’s FDI in Africa. Findings The study finds that a 1 per cent increase in China’s FDI stock in Africa significantly increases Africa’s gross domestic product (GDP) growth by 0.607 per cent, all things being equal. Furthermore, the study finds that a causal link exists between GDP growth in Africa and China’s FDI and the nature of causality is unidirectional. Practical implications The study recommends that to stimulate Chinese FDI in Africa, free visas must be given to Chinese investors coming into the continent, low tariffs should be imposed on inputs and intermediate goods from China and grant of business operation permit to Chinese investors must be made less bureaucratic. Originality/value This research has not been presented to any journal for publication and is originally written by the authors.

scholarly journals A Causal Relationship Between Trade, Foreign Direct Investment and Economic Growth in Niger

2019 ◽  
Vol 8 (2) ◽  
pp. 24-38 ◽  
Author(s):  
Issoufou Oumarou ◽  
Ousseini A. Maiga
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Causal Relationship ◽  
Direct Investment ◽  
Unit Root Test ◽  
Causality Test ◽  
Long Run ◽  
Integration Test ◽  
Stationary Test ◽  
Negative Effect

Abstract Foreign direct investment and Trade were regarded as an important elements in enhancing economic development. This study used some time series econometric tests including the Augmented Dickey – Fuller (ADF) unit root test developed by Dickey – Fuller, stationary test developed by Kwiatkowski-Philips-Schmidt-Shin (KPSS), Johansen co-integration test and Granger causality test to analyse the connection between foreign direct investment, trade and economic growth in Niger. The tests results showed a bilateral relationship between trade and economic growth and a unidirectional causal relationship between trade and foreign direct investment with direction from trade to foreign direct investment. The long run effect tests revealed that trade has a positive effect on economic growth while foreign direct investment has a negative effect on economic growth in Niger. On average, ceteris paribus, the coefficients are statistically significant at 5% level.

Economic Institutions and Growth Nexus: The Role of Governance and Democratic Institutions—Evidence from Time Varying Parameters’ (TVPs) Models

2016 ◽  
Vol 55 (4I-II) ◽  
pp. 675-688
Author(s):  
Ghulam Murtaza ◽  
Muhammad Zahir Faridi
Keyword(s):  
Structural Changes ◽  
Jel Classification ◽  
Economic Institutions ◽  
Time Varying ◽  
Democratic Institutions ◽  
Main Hypothesis ◽  
Dynamic Relationship ◽  
Rolling Window

The present study has investigated the channels through which the linkage between economic institutions and growth is gauged, by addressing the main hypothesis of the study that whether quality of governance and democratic institutions set a stage for economic institutions to promote the long-term growth process in Pakistan. To test the hypothesis empirically, our study models the dynamic relationship between growth and economic institutions in a time varying framework in order to capture institutional developments and structural changes occurred in the economy of Pakistan over the years. Study articulates that, along with some customary specifics, the quality of government and democracy are the substantial factors that affect institutional quality and ultimately cause to promote growth in Pakistan. JEL Classification: O40; P16; C14; H10 Keywords: Economic Institutions, Growth, Governance and Democracy, Rolling Window Two-stage Least Squares, Pakistan

scholarly journals Causal Links between Trade Openness and Foreign Direct Investment in Romania

2021 ◽  
Vol 14 (3) ◽  
pp. 90
Author(s):  
Malsha Mayoshi Rathnayaka Mudiyanselage ◽  
Gheorghe Epuran ◽  
Bianca Tescașiu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Test Procedure ◽  
Real Effective Exchange Rate ◽  
Foreign Direct Investments ◽  
Causality Test ◽  
Fdi Inflows ◽  
Distributed Lag ◽  
Long Run

In this increasingly globalized era, foreign direct investments are considered to be one of the most important sources of external financing for all countries. This paper investigates the causal relationship between trade openness and foreign direct investment (FDI) inflows in Romania during the period 1997–2019. Throughout this study, Trade Openness is the main independent variable, and Gross Domestic Product (GDP), Real Effective Exchange Rate (EXR), Inflation (INF), and Education (EDU) act as control variables for investigating the relationships between trade openness (TOP) and FDI inflow in Romania. The Auto Regressive Distributed Lag (ARDL) Bounds test procedure was adopted to achieve the above-mentioned objective. Trade openness has negative and statistically significant long-run and short-run relationships with FDI inflows in Romania throughout the period. Trade openness negatively affects the FDI inflow, which suggest that the higher the level of openness is, the less likely it is that FDI will be attracted in the long run. The result of the Granger causality test indicated that Romania has a unidirectional relationship between trade openness and FDI. It also showed that the direction of causality ran from FDI to trade openness.

scholarly journals Technology-sourcing investment abroad as an enhancer of Chinese MNEs’ innovative capabilities

2015 ◽  
Vol 10 (2) ◽  
pp. 243-271 ◽  
Author(s):  
Philippe Gugler ◽  
Laura Vanoli
Keyword(s):  
Foreign Direct Investment ◽  
Citation Analysis ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Knowledge Diffusion ◽  
Technological Capabilities ◽  
Content Type ◽  
Chinese Mnes ◽  
Firm Knowledge ◽  
Innovative Capabilities

Purpose – The purpose of this paper is to focus on Chinese firms’ innovation processes that are induced by foreign direct investment abroad. The study uses a patent and citation analysis to examine the extent to which investments abroad contribute to enhancing these firms’ innovative capabilities. More specifically, this study focusses on the role of foreign location competitiveness as an asset to provide technological capabilities to Chinese affiliates. Design/methodology/approach – Patents are good indicators of firms’ innovative capabilities. Moreover, patents allow to track the inter-firm knowledge transfer through the citations of patents on which they are based. The authors use an OECD patent database called “OECD REGPAT July 2013” that compiles patents registered with the European Patent Office (EPO) over the period from 1986 to 2013. The authors focus the analysis on patents registered by Chinese multinational enterprises’ (MNEs) based in Europe because the authors assume inter alia that innovations patented by Chinese affiliates in Europe are registered with the EPO. The sample comprises 3,010 patents involving 5,749 citations that the authors have individually examined. Findings – The findings suggest that Chinese MNEs ability to generate innovation based on their own knowledge is low, with a self-citation rate of approximately 4 percent. Patents by Chinese MNEs are largely based on foreign patents, especially from developed economies (at least 90 percent). The citation analysis also suggests that 39.2 percent of citations represent domestic firms in the local recipient country. This subgroup of citations is categorized as follows: 1.04 percent are M&A linkages, 13.8 percent are cluster linkages, and 24.36 percent are localization linkages. The remaining 60.8 percent of the total sample demonstrates that firms do not necessarily need to be collocated in foreign locations with domestic firms to exchange assets. Research limitations/implications – Patent and citation analysis considers only a part of the inter-firm knowledge diffusion. Some innovations are not patented and tacit knowledge diffusion is not observable. Moreover, the analysis focusses only on Chinese outward foreign direct investment to Europe, but a large part of knowledge is accumulated in China thanks to inward foreign direct investment. Originality/value – Many scholars have scrutinized emerging markets multinational enterprises’ strategic asset-seeking investments abroad that are designed to upgrade the companies’ technological capabilities (Cui and Jiang, 2009; Zhang and Filippov, 2009; Huang and Wang, 2013; Amighini et al., 2014; De Beule et al., 2014; Nicolas, 2014). However, few studies analyze the results of these strategies in terms of innovation output.

Neither side is ready to step back in Georgian crisis

2021 ◽  
Keyword(s):  
United States ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Prime Minister ◽  
The United States ◽  
Content Type ◽  
Eu Membership ◽  
National Movement ◽  
Election Victory ◽  
Political Turmoil

Significance The authorities went ahead with the arrest of Nika Melia, leader of the opposition United National Movement (UNM), on February 23 even after the prime minister resigned in protest. Georgian Dream's actions have caused concern in Western capitals that approved its election victory when the opposition cried foul. Impacts The crisis is a setback for the government's stated plan to apply for EU membership in 2024. There is growing talk in the United States about individual sanctions targeting Ivanishvili and his associates. Political turmoil will harm hopes of foreign direct investment and the imminent Anaklia port tender.

India’s vaccine diplomacy brings money and influence

2021 ◽  
Keyword(s):  
United States ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Manufacturing Sector ◽  
The United States ◽  
Active Pharmaceutical Ingredients ◽  
Content Type ◽  
Pharmaceutical Ingredients ◽  
The World

Significance Last week, its partners in the ‘Quad’ grouping -- the United States, Japan and Australia -- agreed to help increase its vaccine manufacturing and exporting capacity. Each of the Quad members is wary of China, which like India is gifting and selling coronavirus jabs around the world. Impacts India’s manufacturing sector will attract more foreign direct investment. Greater cooperation over supply chains will help strengthen India-Australia ties. Indian pharma will in the long term aim to ease dependence on imports of active pharmaceutical ingredients from China.

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