scholarly journals External debt stock, foreign direct investment and financial development

2019 ◽  
Vol 27 (1) ◽  
pp. 81-98
Author(s):  
Daniel Agyapong ◽  
Kojo Asare Bedjabeng
Keyword(s):  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
External Debt ◽  
Financial Sector ◽  
Annual Data ◽  
Method Of Moment ◽  
Content Type ◽  
Development Indicators ◽  
High Level

Purpose The purpose of this paper is to examine the role external debt and foreign direct investment play in influencing financial development in Africa. Design/methodology/approach Annual data on external debt, foreign direct investment and financial development were extracted from the World Bank World Development Indicators from 2002 to 2015. The data employed were analysed within causal research design and the dynamic panel using generalized method of moment estimation approach. Findings The findings revealed that external debt and foreign direct investment have a significant positive relationship with financial development in African economies. Governments of the sampled economies should enact policies that would help attract high level of foreign direct investment as it contributes positively to financial development. Finally, governments of the sampled African economies should ensure foreign direct investment and external funds borrowed are channelled to productive sectors. Originality/value The paper analysed the relationship between external debt, FDI inflows and financial sector development. The paper is the first in terms of such analysis within the framework of the dual-gap framework, which is the first time in these kinds of studies. Previous studies have concentrated on the effect of financial sector on FDI and not the other way around.

scholarly journals Growth effect of foreign direct investment and financial development: new insights from a threshold approach

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Thu-Ha Thi An ◽  
Kuo-Chun Yeh
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Smooth Transition ◽  
Growth Effect ◽  
Annual Data ◽  
Content Type ◽  
New Findings ◽  
Threshold Approach

PurposeThe purpose of this study is to examine the effect of foreign direct investment (FDI) on economic growth contingent on the development level of the local financial system in emerging and developing Asia during the period 1996–2017.Design/methodology/approachThe study adopts the threshold approach, namely the panel smooth transition regression (PSTR) model, for the annual data collection of 18 emerging and developing Asian countries in 22 years. The authors analyze the alternative PSTR models on different proxies of financial development (FD).FindingsThe results show new findings of two distinct thresholds of FD in the FDI–growth nexus. The growth-enhancing effect of FDI is realized only when the FD lies between the two threshold values. Notably, at very high levels of FD, the beneficial effect of FDI on growth is vanishing.Originality/valueThe authors provide new insights into the growth effect of FDI and the role of FD. The estimated nonlinear effect of FDI on growth and the thresholds of FD can be benchmarks for emerging and developing Asia in assessment of their situations. The results suggest important implications to the region in setting the long-run policies to boost the effect of FDI on economic growth.

scholarly journals Intellectual Property and Foreign Direct Investment

2019 ◽  
Vol 14 (2) ◽  
pp. 26-32
Author(s):  
Nur Hayati Abd Rahman ◽  
Khairunnisa Abd Samad ◽  
Shahreena Daud ◽  
Zarinah Abu Yazid
Keyword(s):  
Foreign Direct Investment ◽  
Intellectual Property ◽  
Direct Investment ◽  
Random Effect ◽  
Digital Economy ◽  
Intellectual Property Protection ◽  
Annual Data ◽  
New Business ◽  
Asean Countries ◽  
High Level

With help from both domestic and international markets, ASEAN countries are able to catch-up withthe latest economic development if they can sustain high economic growth for a long-period of time. To doso, the resources available in countries such as capital and labors should fully be utilized up to theoptimum level. The capital itself can be in many forms such as investment. Since most of the ASEANcountries are categorized as developing countries, the reliance on foreign direct investment (FDI) as asource of growth is highly needed as it helps the economy to step on a higher stage of economic developmentvia the roles of foreign experts and technological transfer. In ensuring a higher level of investment, there isa need to ensure a high level of intellectual property protection since it assists in promoting invention,innovation and new business development. In opposite, lacking in protection might discourage foreigninvestors to invest in the countries, thus limiting the ability of the countries to grow further. Therefore, theaim of this paper is to examine whether strong intellectual property protection will really help in attractingmore foreign investors to invest in ASEAN-5 countries. Using annual data from 2007 to 2016, panel dataestimation using random effect is employed. It was found that the ASEAN-5 countries should strengthentheir intellectual property protection in order to stimulate higher foreign investments. Nevertheless, inbetween copyright and patents, copyrights protection gives significant effect to the FDI inflows relative tothe latter one. It indicates that the countries are slowly moving out from the production-based economy andcatching-up towards a digital economy. Keywords: ASEAN-5, foreign direct investment, intellectual property protection, digital economy, copyrights

The impact of foreign direct investment on trade in Pakistan: the moderating role of terrorism

2020 ◽  
Vol 47 (5) ◽  
pp. 1137-1154
Author(s):  
Syed Hasanat Shah ◽  
Hafsa Hasnat ◽  
Delpachitra Sarath
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Deficit ◽  
Method Of Moment ◽  
Content Type ◽  
The Face ◽  
External Sector ◽  
Generalized Method Of Moment ◽  
The Impact

PurposePakistan suffered with the menace of terrorism for long and become a front line state in the “War on Terror”. Terrorism shattered Pakistan economy and rendered her external sector vulnerable to instability and uncertainties.Design/methodology/approachTherefore, using system generalized method of moment (GMM), this paper investigates the impact of foreign direct investment (FDI) on exports, imports and trade deficit in the face of unabated terrorism in Pakistan.FindingsThe findings of the paper suggest that as terrorism in Pakistan increased, FDI contribution to Pakistan exports decreased while FDI contribution to Pakistan imports significantly increased. Terrorism also disrupted the chain of local production and increased Pakistan reliance on imports. Thus terrorism widened Pakistan trade deficit of Pakistan and expose Pakistan to external imbalances.Originality/valueDespite rise in organized acts of terrorism and its adverse impact on various departments of economy, hardly any study bothers to check its impact on trade and investment nexus. This is the first study of its nature that looks deep down to understand how terrorism affects the relation of major economic variables.

scholarly journals The Effects of Green Financial Development on Economic Growth in Pakistan

2021 ◽  
Vol 3 (3) ◽  
Author(s):  
Muhammad Atif Nawaz ◽  
Muhammad Sajjad Hussain ◽  
Altaf Hussain
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Positive Impact ◽  
Development Indicators ◽  
Green Finance ◽  
Green Investment ◽  
World Development

Sustainable development is now a mantra for which every country is striving for it and green finance, and green financial development which is advancement in financial activities harmonized with environmental protection and ecological balance, is considered as the foremost solution for it. Keeping in view the importance of green financial development for the economic growth, this study aims to examine the effects of green financial development such as green credit, green securities, green insurance, green investment, and foreign direct investment on the economic growth of Pakistan. The time series has extracted from World Development Indicators (WDI) and State Bank of Pakistan (SBP) for the period 1981 to 2019. For the analysis purpose, Autoregressive distributive lag (ARDL) and Granger casualty have been executed. The findings established empirically that green financial development such as green credit, green securities, green insurance, green investment, and foreign direct investment have a positive impact on the economic growth of Pakistan. These findings provide the insight to the regulators that they should enhance their focus towards green financial development that is imperative for the economic growth of the country.

scholarly journals The impact of financial sector reforms on foreign direct investment in an emerging economy: empirical evidence from Ghana

2020 ◽  
Vol 2 (4) ◽  
pp. 271-284
Author(s):  
Kofi Kamasa ◽  
Isaac Mochiah ◽  
Andrews Kingsley Doku ◽  
Priscilla Forson
Keyword(s):  
Foreign Direct Investment ◽  
Empirical Evidence ◽  
Direct Investment ◽  
Least Squares Method ◽  
Financial Sector ◽  
Ordinary Least Squares ◽  
Sector Reform ◽  
Content Type ◽  
Financial Sector Reform ◽  
The Impact

Purpose This paper aims to empirically investigate the impact that financial sector reforms have on foreign direct investment (FDI) in Ghana. Design/methodology/approach Composite financial sector reform index was constructed, which was made up of various forms of reform policies that were implemented from 1987 to 2016. The auto regressive distributed lag bounds test was used to establish cointegration between variables. Having controlled for other covariates that affect FDI such as trade openness, exchange rate, gross domestic product per capita, inflation and by using the fully modified ordinary least squares method, the estimations are robust as it uses a semi-parametric correction to avoid for any possible issues of endogeneity and serial correlation. Findings Results from the paper reveal that financial sector reform deepening boost FDI with a 2.167% increase in FDI following from a unit percentage improvement of the financial sector reforms. Considering the various categories of reforms, the results reveal that competitive reforms have the highest impact on FDI followed by privatization reforms with positive and significant elasticity coefficients of 2.174% and 0.726%, respectively. Behavioral reforms revealed a positive effect on FDI, albeit insignificant. Originality/value The paper contributes to policy by providing empirical evidence on the effect of financial sector reform on FDI inflows in Ghana. As far as the review of literature is concerned, this paper provides the foremost empirical evidence on the subject with sole emphasis on Ghana. Thus, this paper suggests the deepening of the financial sector reforms, improving competition and maintaining macroeconomic stability.

The economic determinants of Chinese foreign direct investment in Egypt

2015 ◽  
Vol 8 (1) ◽  
pp. 20-26 ◽  
Author(s):  
Hany M Elshamy
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Institutional Environment ◽  
Single Equation ◽  
Positive Influence ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose – This paper aims to investigate the determinants of foreign direct investment (FDI) by Chinese multinational enterprises (MNEs) over the period 1985-2011. Design/methodology/approach – This paper estimates a single equation model which uses long-run co-integration analysis and short-run analysis (error correction mechanism). This paper depends on annual data collected from the World Bank and the General Authority for Investment & Free zones Information & Decision Support Division for the period 1985-2011. Findings – This paper found a conventional result for market size. The author infers from the significant role played by Egyptian natural resource endowments that the institutional environment has strongly shaped Chinese FDI, leading to significant natural resources-seeking FDI. The author also finds that policy liberalisation in China has had a positive influence in stimulating Chinese FDI in Egypt. Originality/value – Despite this model being used to estimate the determinants of FDI by Chinese MNEs in several countries, this is the first time it is being used in Egypt using a time-series analysis. Moreover, this model which has been used in this paper uses both long-run and short-run analyses.

scholarly journals A conceptual literature analysis of the relationship between FDI and exports

2013 ◽  
Vol 11 (1) ◽  
pp. 389-393 ◽  
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Empirical Studies ◽  
Empirical Literature ◽  
Annual Data ◽  
Framework Analysis ◽  
Development Indicators ◽  
Export Sector ◽  
To Come ◽  
The Relationship

The study investigates the theoretical and empirical literature framework that explains the relationship between foreign direct investment (FDI) and exports. Three prominent views explaining the causality relationship between exports and FDI were discussed and these include the FDI- led exports view, exports-led FDI view and the feedback view. FDI-led exports view mentions that exports can increase or decrease in direct response to changes in foreign direct investment inflows or outflows. The exports-led FDI view suggests that exports spur FDI whilst the feedback view says that both exports and FDI promote each other. The trend analysis between FDI and exports for Botswana as a case study was also looked into using time series annual data ranging from 1980 to 2011 obtained from World Development Indicators. The literature review framework analysis shows that the FDI-led exports view is more popular with most theoretical and empirical studies. It is against this background that the author recommends authorities to come up with policies that attract FDI into their economies in order to boost export sector for growth reasons.

Financial development and natural resources nexus in Egypt: the role of clean energy sources and foreign direct investment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dalia M. Ibrahiem ◽  
Rasha Sameh
Keyword(s):  
Foreign Direct Investment ◽  
Natural Resources ◽  
Financial Development ◽  
Direct Investment ◽  
Clean Energy ◽  
Policy Implications ◽  
Energy Sources ◽  
Content Type ◽  
The Impact ◽  
Quantity Of Education

Purpose Achieving the goals of the sustainable development strategy and Egypt’s vision 2030 depends mainly on the existence of sources of funds. And since Egypt faces a great challenge in obtaining finance, then analyzing the drivers of financial development is a vital issue and there is a persistent need to shed light on the key obstacles for it. Thus, this paper aims to empirically assess the impact of natural resources, foreign direct investment (FDI) net inflows, education and clean energy sources on financial development in Egypt using the data of the 1971–2014 period. Design/methodology/approach The paper uses auto-regressive distributed lag and Toda-Yamomoto approaches to fulfill the purpose. Findings Empirical results signify that all variables except natural endowments stimulate financial development which can suggest the presence of the natural resources curse in Egypt. Moreover, the feedback effect between financial development and FDI is recognized. Clean energy sources cause financial development and natural endowments. Financial development causes natural endowments and FDI leads to the deployment of more clean energy resources. Practical implications Several crucial policy implications are suggested based upon these results as improving the quality and quantity of education and encouraging both domestic and foreign investors by providing several incentives. Moreover, the government has to enhance green finance through financing solar energy projects and other environmentally friendly projects. Originality/value It is the first research for Egypt that explores natural resource-financial development nexus using time series analysis according to our information, and two important variables are included in the model which is clean energy sources and FDI. Then, although several studies examined the impact of financial development on clean energy no empirical study before assessed the impact of clean energy on financial development.

Foreign direct investment, financial development and economic prosperity in major south Asian economies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Narayan Sethi ◽  
Aurolipsa Das ◽  
Malayaranjan Sahoo ◽  
Saileja Mohanty ◽  
Padmaja Bhujabal
Keyword(s):  
Foreign Direct Investment ◽  
Financial Development ◽  
Free Trade ◽  
South Asian ◽  
Direct Investment ◽  
Gdp Per Capita ◽  
Content Type ◽  
Asian Economies ◽  
Short Run ◽  
Per Capita

PurposeThis paper empirically examines the relationship between foreign direct investment, financial development and other macroeconomic variables like trade openness, domestic investment and labour force and that of GDP per capita in select South Asian countries, i.e. India, Sri Lanka and Pakistan for the period 1990–2018.Design/methodology/approachThe study uses various econometrics tools such as Pedroni, Kao and Johansen–Fisher panel cointegration test, Panel FMOLS and DOLS and Granger causality in order to analyse the long-run and short-run dynamics among the variables under consideration.FindingsThe results of the panel data estimation techniques employed imply that there is a short-run causality running from GDP per capita to FDI and financial development, and results from FMOLS and DOLS indicate that FDI and financial development have positive impacts on GDP per capita in the countries under consideration.Originality/valueIn this paper, we use a dynamic macroeconomic modelling framework to examine the effect of FDI and financial development on per capita income in three major south Asian economies, which are categorized as three Non-Least Developed Contracting States under the South Asian Free Trade Area (SAFTA), 2006, established with an aim to facilitate free trade among them. Considering the diversity of the level of growth experienced by these economies, the study uses appropriate panel regression techniques. Therefore, in addition to proper formulation of policies directed towards scaling up of export and import levels, the respective authorities should also take care that the political stability and institutional quality are maintained.

Financial development and poverty reduction in India: an empirical investigation

2016 ◽  
Vol 43 (2) ◽  
pp. 106-122 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Financial Development ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Annual Data ◽  
Causality Test ◽  
Content Type ◽  
Financial Sector Development ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose – The purpose of this paper is to examine the relationship between financial sector development and poverty reduction in India using annual data from 1970 to 2012. The paper attempts to answer the critical question: does financial sector development lead to poverty reduction? Design/methodology/approach – Stationarity properties of the series are checked by using Ng-Perron unit root test. The paper uses the Auto Regressive Distributed Lag (ARDL) bound testing approach to co-integration to examine the existence of long-run relationship; error-correction mechanism for the short-run dynamics and Granger non-causality test to test the direction of causality. Findings – The co-integration test confirms a long-run relationship between financial development and poverty reduction for India. The ARDL test results suggest that financial development and economic growth reduces poverty in both long run and short run. The causality test confirms that there is a positive and unidirectional causality running from financial development to poverty reduction. Research limitations/implications – This study implies that poverty in India can be reduced by financial inclusion and financial accessibility to the poor. For a fast growing economy with respect to financial sector development this may have far-reaching implication toward inclusive growth. Originality/value – This paper is the first of its kind to empirically examine the causal relationship between financial sector development and poverty reduction in India using modern econometric techniques.

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