scholarly journals Impact of foreign direct investment, remittances and official development assistance on economic growth: panel data approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amna Zardoub ◽  
Faouzi Sboui
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Foreign Direct Investment ◽  
Panel Data ◽  
Direct Investment ◽  
Development Assistance ◽  
Business Environment ◽  
Official Development Assistance ◽  
Financial Flows ◽  
Content Type

PurposeGlobalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – FDI, remittances and official development assistance – can be a key factor in the development of the economy. The subject of this article is to analyses the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been employed. As part of this work, an attempt was made to use a panel data approach. The results indicate ambiguous effects and confirm the results of previous work.Design/methodology/approachThe authors seek to study the effect of foreign direct investment, remittances and official development assistance (ODA) and some control variables i.e. domestic credit, life expectancy, gross fixed capital formation (GFCF), inflation and three institutional factors on economic growth in developing countries by adopting the panel data methodology. Then, the authors will discuss empirical tests to assess the econometric relevance of the model specification before presenting the analysis of the results and their interpretations that lead to economic policy implications. As part of this work, the authors have rolled panel data for developing countries at an annual frequency during the period from 1990 to 2016. In a first stage of empirical analysis, the authors will carry out a technical study of the heterogeneity test of the individual fixed effects of the countries. This kind of analysis makes it possible to identify the problems retained in the specific choice of econometric modeling to be undertaken in the specificities of the panel data.FindingsThe empirical results validate the hypotheses put forward and indicate the evidence of an ambiguous effect of financial flows on economic growth. The empirical findings from this analysis suggest the use of economic-type solutions to resolve some of the shortcomings encountered in terms of unexpected effects. Governments in these countries should improve the business environment by establishing a framework that further encourages domestic and foreign investment.Originality/valueIn this article, the authors adopt the panel data to study the links between financial flows and economic growth. The authors considered four groups of countries by income.

Do surges in foreign direct investment inflows lead to surges in economic growth? Evidence from developing countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jagadish Prasad Sahu
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Domestic Investment ◽  
Fdi Inflows ◽  
Content Type ◽  
Regression Methods ◽  
Recursive Bivariate Probit ◽  
Rapid Economic Growth

Purpose The purpose of this paper is to examine whether surge in foreign direct investment (FDI) inflows leads to surge in economic growth in 52 developing countries for the period 1990-2014. Design/methodology/approach The author used a threshold approach to identify surge incidences in gross domestic product (GDP) per capita growth rates and FDI inflows (measured as percentage of GDP) for each country included in the sample. Three different criteria are used to identify surge instances. As a preliminary analysis the author used the probit and complementary log–log regression methods to estimate the likelihood of growth surge occurrence. To correct the potential endogeneity problem the author jointly estimated the growth surge and FDI surge equations using the recursive bivariate probit (RBP) regression. Findings The author found that East Asia and the Pacific region has highest rate of growth surge incidences followed by South Asia. The results suggest that surge in FDI inflows significantly increases the likelihood of growth surge. The finding is robust to alternative surge definitions and methods of estimation. Practical implications The analysis reveals that inbound FDI flow is a critical driver of economic growth in developing countries. Large FDI inflows matters for achieving rapid economic growth. Therefore developing countries should adopt favourable policies to attract more FDI. Policymakers should focus on improving the investment climate of the country to boost domestic investment and to attract larger amount of FDI into the economy. Originality/value To the best of the author’s knowledge this is the first study to examine whether surge in FDI inflows stimulates surge in economic growth in developing countries. The analysis reveals that FDI surge is a robust predictor of rapid economic growth in developing countries.

scholarly journals DO FOREIGN FINANCIAL INFLOWS IMPACT ON ECONOMIC GROWTH? EVIDENCE FROM SUB-SAHARAN AFRICA

2020 ◽  
Vol 38 (2) ◽  
Author(s):  
Daniel Kwabena Twerefou ◽  
Festus Ebo Turkson ◽  
Belinda Frimpong-Wiafe ◽  
Samuel Antwi Darkwah
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Development Assistance ◽  
Government Expenditure ◽  
Official Development Assistance ◽  
Sub Saharan Africa ◽  
Domestic Investment ◽  
Sub Saharan

The study examines the impact of financial inflows, proxied by Foreign Direct Investment, Official Development Assistance and remittances on Economics growth in Sub-Saharan Africa using the Generalized Method of Moments technique and panel data for 47 Sub Saharan African countries for the period 1995-2017, while controlling for domestic investment, human capital, government expenditure, trade openness, inflation, financial development, political rights and civil liberty. The results indicate that remittances and Foreign Direct Investment are growth-enhancing as they impact positively on economic growth consistent with Solow neoclassical model. However, Official Development Assistance reduces economic growth possibly as a result of weak institutional quality. While government expenditure, domestic investment and inflation positively impact on Economics growth, trade openness and Secondary School Enrolment had a negative impact on growth. We recommend countries in the sub-region to come up with policies that encourage Foreign Direct Investment and remittances inflow while ensuring that institutional structures are improved to ensure the efficiency of Official Development Assistance and the better allocation of such resources. Countries also need to focus more on internal sources of finance for government expenditure.

Determinants of foreign direct investment inflow to the agricultural sector: a panel-data analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Seyed Reza Zeytoonnejad Mousavian ◽  
Seyyed Mehdi Mirdamadi ◽  
Seyed Jamal Farajallah Hosseini ◽  
Maryam Omidi NajafAbadi
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Panel Data ◽  
Host Country ◽  
Direct Investment ◽  
Agricultural Sector ◽  
Fdi Inflows ◽  
Content Type ◽  
Main Determinants ◽  
Determinants Of Fdi

PurposeForeign Direct Investment (FDI) is an important means of boosting the agricultural sectors of developing economies. The first necessary step to formulate effective public policies to encourage agricultural FDI inflow to a host country is to develop a comprehensive understanding of the main determinants of FDI inflow to the agricultural sector, which is the main objective of the present study.Design/methodology/approachIn view of this, we take a comprehensive approach to exploring the macroeconomic and institutional determinants of FDI inflow to the agricultural sector by examining a large panel data set on agricultural FDI inflows of 37 countries, investigating both groups of developed and developing countries, incorporating a large list of potentially relevant macroeconomic and institutional variables, and applying panel-data econometric models and estimation structures, including pooled, fixed-effects and random-effects regression models.FindingsThe general pattern of our findings implies that the degree of openness of an economy has a negative effect on FDI inflows to agricultural sectors, suggesting that the higher the degree of openness in an economy, the lower the level of agricultural protection against foreign trade and imports, and thus the less incentive for FDI to inflow to the agricultural sector of the economy. Additionally, our results show that economic growth (as an indicator of the rate of market-size growth in the host economy) and per-capita real GDP (as an indicator of the standard of living in the host country) are both positively related to FDI inflows to agricultural sectors. Our other results suggest that agricultural FDI tends to flow more to developing countries in general and more to those with higher standards of living and income levels in particular.Originality/valueFDI inflow has not received much attention with respect to the identification of its main determinants in the context of agricultural sectors. Additionally, there are very few panel-data studies on the determinants of FDI, and even more surprisingly, there are no such studies on the main determinants of FDI inflow to the agricultural sector. We have taken a comprehensive approach by studying FDI inflow variations across countries as well as over time.

scholarly journals Foreign direct investment, financial development and economic growth in Asian developing countries

2020 ◽  
Vol 2 (1) ◽  
Author(s):  
Nguyen Van Phuc ◽  
Nguyen Thuc Duy Anh
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Foreign Direct Investment ◽  
Panel Data ◽  
Regression Model ◽  
Financial Development ◽  
Direct Investment ◽  
Fixed Effects ◽  
Lm Test ◽  
Asian Developing Countries

This research investigates the role of domestic financial development in enhancing the positive effects of foreign direct investment (hereafter, FDI) on economic growth in Asian developing countries. In other words, we examine whether countries with a better domestic financial system can utilize FDI more efficiently. The empirical analysis uses balanced panel data of 24 Asian developing countries in the period 1995-2009. This research applies the various models and techniques in panel data regression. Linear static models for panel data, including constant coefficients model or pooled regression model (POOLED), fixed effects regression model (FEM) and random effects regression model (REM) are employed. We analyze all models and employ several kinds of test including poolability test, Hausman test, LM test, fixed effects tests and Wald tests to select the most appropriated estimated model. The research findings show that FDI alone does not have direct effect on economic growth but does have when combined with financial development. Well-developed domestic financial markets promote the process of technological diffusion associated with FDI in Asian developing countries. Therefore, FDI and domestic financial development are complementary in increasing the rate of economic growth in the region. There is a threshold level of domestic financial development above which FDI starts to have positive impacts on economic growth.

Financing sources and social development: an empirical analysis

2019 ◽  
Vol 15 (5) ◽  
pp. 640-657
Author(s):  
María Vidales ◽  
Carmelo García-Pérez
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Development Assistance ◽  
Econometric Models ◽  
Official Development Assistance ◽  
Inclusive Development ◽  
Joint Analysis ◽  
Positive Contribution ◽  
Content Type ◽  
Explanatory Variables

PurposeThe purpose of this paper is to analyse, from an empirical point of view, the importance of each of the main sources of funding in developing countries (foreign direct investment, official development assistance, external debt and remittances) in achieving sustainable, social and inclusive development.Design/methodology/approachThe methodology followed to achieve this purpose is the construction of three econometric models. The general model incorporates as a dependent variable the Human Development Index (HDI) and, as explanatory variables, the four sources of funding indicated above, as well as three exogenous variables (human capital, corruption and natural resources). This model is complemented by two extensions that aim to analyse the behaviour of explanatory variables in reducing inequalities and improving each of the HDI components.FindingsThe results of the estimations of the econometric models show that foreign direct investment and remittances are the sources of funding with the greatest impact on achieving development. Moreover, official development assistance while not making a positive contribution to the achievement of development as a whole, could be adequate to reduce inequalities.Originality/valueThe added value of this paper consists in carrying out a joint analysis of these four sources of funding because previous researches focussed the attention on some of them, drawing partial conclusions. The conclusion of this study is that the four sources of funding analysed can be considered complementary to promote sustainable and inclusive development, although foreign direct investment has a much more important role.

scholarly journals Exploring the links between financial flows and economic growth: a panel ARDL approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amna Zardoub
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
The Other ◽  
Short Term ◽  
Financial Flows ◽  
Content Type ◽  
Panel Ardl ◽  
Long Run ◽  
Short Run

Purpose Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – foreign direct investment, remittances and official development assistance – can be a key factor in the development of the economy. The purpose of this study is to analyze the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been used. As part of this study, an attempt was made to use a combined autoregressive distributed lag (ARDL) panel approach to study the short-term and long-run effects of financial flows on economic growth. The results indicate ambiguous effects. Economically, the effect of financial flows on economic growth depends on the investor’s expectations. Design/methodology/approach To study the short-run and long-run effects of financial flows on economic growth, this paper considers an empirical approach based on the panel ARDL. This model makes it possible to distinguish between the short-run effect and the long-run one. This type of model is based on three estimators, namely, mean group, pooled mean group (PMG) and dynamic fixed effect. Findings Results confirm the existence of a long-run relationship because the adjustment coefficient (error correction parameter) is negative and statistically significant. This paper finds that the PMG estimator is more consistent and more efficient. In the short-run, foreign direct investment do negatively affect economic growth, the effect is no significant in the long-run. On the other hand, the effect of remittances on economic growth is significant in the short-run. However, it is no significant in the long-run. Finally, the results suggest that the effect of official development assistance on economic growth is insignificant; both in the long-run and in the short-run. Originality/value To study the interaction between financial flows and economic growth, some empirical methodology are used such as the dynamic panel data and the autoregressive vector (VAR) model. In this study, we apply the panel ARDL model to analyze the short-run and the long-run effect for each financial flow on economic growth. The objective is to study the heterogeneity on dynamic adjustment in the short-term and long-term.

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