scholarly journals THE IMPACT OF INSTITUTIONAL FACTORS ON FOREIGN DIRECT INVESTMENT INFLOWS: CROSS-COUNTRY ANALYSIS

2019 ◽  
Vol 7 ◽  
Author(s):  
Rogneda Groznykh ◽  
Igor Drapkin ◽  
Oleg Mariev
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Institutional Development ◽  
Institutional Factors ◽  
Fdi Inflows ◽  
Positive Effects ◽  
Cross Country ◽  
The Impact

This research paper is devoted to analysis of various institutional factors as determinants of foreign direct investment (further – FDI) inflows to different countries. The objective of the research is to estimate the effect of institutions on FDI inflows. The analysis is provided on a database of cross-country FDI inflows on 72 countries FDI-importers and 112 countries FDI-exporters in the period from 2001 to 2016. It is supposed in the paper that the impact of institutional factors might be different for the groups of developed and developing countries; since developed economies have higher institutional indicators, they tend to attract larger amounts of foreign direct investment compared to developing economies, where institutional development is at the lower level. The estimation is based on the gravity approach, which considers the positive effects of countries’ GDP and the negative effect of the distance between them. The main method used for the econometric estimation is the Pseudo Poisson Maximum Likelihood (PPML) regression, which is considered to be one of the adequate methods for estimating such data. During the research the problems of zero-observations and correlation between institutional indicators are solved. The results have shown that higher quality of institutions tends to attract more foreign direct investment to a country. Thus, institutions in developed countries have positive and significant impact on FDI attraction. At the same time, the analysis of developing countries has shown that some institutions have less significant influence on the FDI inflows. Based on the results of the research, possible recommendations for government policy on institutional improvement can be suggested.

scholarly journals THE ROLE OF POLITICAL STABILITY IN FOREIGN DIRECT INVESTMENT ATTRACTION: CROSS-COUNTRY ANALYSIS

2020 ◽  
Vol 1 ◽  
pp. 76-83
Author(s):  
Rogneda Groznykh ◽  
Oleg Mariev ◽  
Sergey Plotnikov ◽  
Maria Fominykh
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Positive Impact ◽  
Political Stability ◽  
Primary Objective ◽  
Fdi Inflows ◽  
Cross Country ◽  
The Impact ◽  
Foreign Direct Investment Inflows

This study is devoted to the evaluation and scrutiny of political stability as a determinant of foreign direct investment (FDI) inflows to different countries. The primary objective of the research is to estimate the impact and influence of various indicators of political stability on foreign direct investment inflows. The analysis is delivered based on a database on cross-country FDI inflows of 66 FDI-importer countries and 98 FDI-exporter countries, in the period between 2001-2018. This article uses the assumption that the impact of political stability might be different for both the groups of developed and developing countries. As the developed economies have higher political stability, they tend to attract larger amounts of foreign direct investment compared to developing economies, where the political situation can be less stable. Furthermore, the estimation applies the gravity approach, while the main method used for the econometric calculations is the Pseudo Poisson Maximum Likelihood (PPML) regression. The outcome revealed that in most cases the indicators of political stability had a positive impact on the foreign direct investment inflows. However, the results are not constant for all groups of countries. Therefore, if a developed country is an importer of investment, then most of the indicators of political stability become significant and have a positive influence on the foreign direct investment. At the same time, if the importer is a developing country, then for the investor-developed economy, political stability becomes a significant factor. Similarly, if the FDI-exporter is a developing economy, then determinants of political stability are insignificant. Based on these results, possible recommendations for refined government policies can be suggested.

scholarly journals Impact of Foreign Direct Investment on Domestic Investment in Developing Countries

2020 ◽  
Vol 6 (9) ◽  
pp. 256-266
Author(s):  
A. Mamatkulov
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Negative Impact ◽  
Domestic Investment ◽  
Short Term ◽  
Total Investment ◽  
The Impact

Author analyzes the impact of foreign direct investment on domestic investment in host developing countries and checks whether a foreign direct investment has a “positive” or “negative” impact on domestic investment, as well as evaluating the impact of selected variables on this relationship. Using a full sample, the main conclusion of this study is that FDI does have a positive (crowding out) effect on domestic investment in this sample of developing economies. In the short term, an increase in FDI by one percentage point as a percentage of GDP leads to an increase in total investment as a percentage of the host country’s GDP of about 10.7%, while in the long term this effect is about 31% dollar terms, one US dollar represents us 1.7$ of total investment in the short term and us 3.1$ in the long term. Based on the results of this study, it was once again proved that inflation hinders domestic investment in host countries by 0.04% and 0.12% in the short and long term, respectively.

scholarly journals Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

2021 ◽  
Vol 17 (4) ◽  
pp. 1390-1404
Author(s):  
R.I. Vasilyeva ◽  
◽  
O.S. Mariev ◽  
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Political Stability ◽  
Policy Implications ◽  
Likelihood Method ◽  
Developed Economies ◽  
Development Level ◽  
The Impact

Stable political environment and prominent development of political institutions increase foreign direct investment flows by providing lower risks for investors. However, this impact can vary according to the development of the country. This study aims to investigate the impact of various indicators of political stability on foreign direct investment attraction for different economies distinguished by their development level. Our database includes 66 FDI-recipient countries and 98 FDI-investing countries for the period from 2001 to 2018. By applying the gravity approach and Poisson Pseudo Maximum Likelihood method with instrumental variables (IV PPML), we model bilateral FDI flows, incorporating variables reflecting various aspects of political stability formed by the principal components analysis. Interestingly, we found mixed results regarding the impact of political stability on FDI flows. In particular, political stability indicators were found to be insignificant, when analysing the bilateral FDI flows for the group of developed economies. We obtained similar result for the group of developing economies. However, political stability variables significantly influence FDI flows for countries with different development level, confirming the hypothesis that countries’ development affects bilateral FDI flows. Besides, we discover the significant difference between developed and developing countries referring to FDI-investors. Based on the obtained results, we highlight a few policy implications for developing and developed economies.

scholarly journals Developing Countries' Attractiveness for Foreign Direct Investment - Debt Overhang and Sovereign Risk as Major Impediments?

1991 ◽  
Vol 30 (4II) ◽  
pp. 1145-1158 ◽  
Author(s):  
Peter Nunnenkamp
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Sovereign Risk ◽  
Financial Flows ◽  
Fdi Inflows ◽  
Debt Overhang ◽  
Private Lending ◽  
The Impact ◽  
The Empirical Analysis

With declining debt inflows, foreign direct investment (FDI) has again become one of the major pillars of private financial flows to developing countries (Des). This has created some expectation to replace private bank olending by FDI. However, many heavily indebted countries may not only be constrained in terms of new private lending, but also in terms of FDI inflows. In order to overcome constraints in the supply of FDI, the determinants of FDI flows have to be identified in the first place. This has been done by the Kiel Institute of World Economics in a comprehensive study commissioned by the World Bank. The present paper summarizes some of the major results for details, see Agarwal et aZ. (1991). The focus is on the impact of sovereign risk on FDI and on possible disincentives for FDI arising from a debt overhang, i.e. on those aspects that reflect the most important recent changes in international capital market conditions. The empirical analysis concentrates on the 1980s. Regressions are run for an overall sample of about 35 host Des and for various subgroups. The paper is organized as follows. Section II presents the major hypotheses. The empirical results are summarized in Sections III and IV. Finally, some policy conclusions are drawn in Section V.

Foreign Direct Investment and Poverty Reduction

2017 ◽  
Vol 18 (2) ◽  
pp. 135-157 ◽  
Author(s):  
Manmohan Agarwal ◽  
Pragya Atri ◽  
Srikanta Kundu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Poverty Reduction ◽  
Developing Economies ◽  
Capital Controls ◽  
Capital Inflows ◽  
Capital Account Liberalization ◽  
Fdi Inflows ◽  
The Impact ◽  
Free Movement Of Capital

It is widely proclaimed that capital account liberalization would immensely benefit developing economies because once capital controls are lifted, developing economies create a potential for movement of capital. And, this free movement of capital could possibly increase growth thereby lifting millions out of poverty. India has been gradually liberalizing since the 1980s and throughout more capital inflows were observed compared to outflows. Also, the composition of capital flows has been changing since the 1980s–with Foreign Direct Investment (FDI) inflows rising steadily post-1991compared to portfolio and debt flows. However, since 2000, FDI outflows from India were also witnessed. In this paper we empirically test the impact of FDI flows on poverty in India for 1980–2011. To provide a correct perspective to India’s performance we also analyze the link between FDI flows and poverty for SAARC countries. For a better understanding of how FDI flows impact poverty, we analyze the outflows and inflows separately. The results show both similarities and contrasts in the behaviour of India in comparison with the other SAARC countries.

scholarly journals Does Greenfield Foreign Direct Investment Inflow contribute in Socioeconomic Development? Empirical Evidence from Developing Countries

2021 ◽  
Vol 9 (3) ◽  
Author(s):  
Shahid Akbar ◽  
Ali Raza ◽  
Zahid Raza
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Economic Development ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Dependent Variables ◽  
Socio Economic Development ◽  
The Impact ◽  
Positive Effect

This study aims to assess the impact of Greenfield-Foreign Direct Investment (FDI) inflows on the socio-economic development of ten developing countries. Developing economies rely on investment from developed countries, especially Greenfield investment. Greenfield investment is the new capital inflow to the host country's economy that helps to improve economic activities, boosts economic growth, and improves socio-economic welfare. This study has used Greenfield investment as the target-independent variable and other controlled variables remittances, aid, inflation, population, and trade openness. At the same time, socio-economic development, health, economic growth, and education are dependent variables. For this purpose, Pooled Mean Group (PMG) technique/Panel Autoregressive-Distributed Lag (ARDL) has applied for estimation purposes from 1990 to 2017. The empirical findings have shown that Greenfield-FDI has a long-term statistically significant and positive effect on economic growth, health, education, and socio-economic development. In comparison, remittances and official development assistance have positive and negative impacts on the study's dependent variables. The population also has a positive effect, whereas inflation and trade have mixed results. Outcomes of this study advise that policymakers should adopt attractive investment policies to enhance more foreign investment and utilize it efficiently, thereby promoting sustainable development. The government should announce firms to invest in human capital, which will impact productivity.   

scholarly journals Corruption and Foreign Direct Investment: Empirical investigation of Asian Developing Economies

2020 ◽  
Vol 13 (4) ◽  
pp. 68-81
Author(s):  
Mahnaz muhammad Ali ◽  
Mariam Abbas Soharwardi ◽  
Rozina Sadiq
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Empirical Investigation ◽  
Developing Economies ◽  
Positive Impact ◽  
The Other ◽  
Fdi Inflows ◽  
System Gmm ◽  
The Impact ◽  
Potential Recipient

Developing economies have different cultural and economic characteristics, but they often experience similar levels of corruption. At one side developing economies are facing the issue of corruption; on the other hand, they are a potential recipient of FDI. The present study used the data of 31 developing Asian economies from 2000 to 2017 to determine the impact of host country’s level of corruption on inward FDI. System GMM technique is applied for empirical investigation since the problem of endogeneity and heteroscedasticity are found in the models. Results reveal that corruption has a positive and statistically significant impact on inward FDI; corruption also has a positive impact on FDI inflows to GDP ratio for the panel countries. Hence the results of the study endorse the grease the wheel hypothesis of corruption. It is concluded countries should focus their resources to create business friendly environment instead to focus on anti-corruption policies only.   

scholarly journals THE ROLE OF SPECIAL ECONOMIC ZONES IN ATTRACTING FOREIGN DIRECT INVESTMENT TO DEVELOPING ECONOMIES

2020 ◽  
pp. 16-29
Author(s):  
L. V. Progunova ◽  
V. I. Masalytin
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Well Being ◽  
Economic Downturn ◽  
Special Economic Zones ◽  
Geographical Regions ◽  
Economic Zones ◽  
The Impact

The article analyzes the possibilities of developing countries to use special economic zones (SEZs) to attract foreign direct investment (FDI) as a source of economic growth, especially in times of global economic downturn. Special economic zones have played and continue to play an important role as drivers of the global economy, passing through themselves about 30 percent of world trade and affecting the growth of well-being and prosperity of people around the world. Each zone is unique and has its own specialization. Subject to a well-thoughtout concept, political will, the maintenance of an adequate infrastructure, and the use of world best practices, SEZs help to attract investments to create jobs, increase income and export, receive foreign exchange, connect to international supply chains and develop indirect employment outside the SEZ, but inside economies that accept FDI. The impact of SEZs on FDI inflows is examined using examples from different geographical regions. More than two thirds of the SEZ managed to attract FDI to their territory, and about half – significant. The leaders in attracting foreign direct investment are zones created on the territory of developing countries and especially Asian states. Among the top ten zones for attracting FDI, eight zones have been created in the developing world. In our opinion, these results can be considered essential for the further study, use and improvement of the SEZ instrument as an investment driver of developing economies.

scholarly journals THE IMPACT OF INSTITUTIONAL EFFICIENCY ON THE FOREIGN DIRECT INVESTMENT INFLOWS IN DEVELOPING COUNTRIES

2018 ◽  
Vol 6 ◽  
pp. 141-145
Author(s):  
Alena D. Galenkova ◽  
Igor M. Drapkin ◽  
Oleg S. Mariev
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Fixed Effects ◽  
Positive Impact ◽  
Main Tool ◽  
Institutional Factors ◽  
Econometric Modeling ◽  
The Impact ◽  
Foreign Direct Investment Inflows

The aim of this paper is assessing the impact of the effectiveness of the country's institutions on the foreign direct investment inflows in developing countries with the use of econometric modeling. We put forward a hypothesis about the positive impact of institutional factors on the foreign direct investment inflow. The overall influence of institutions is evaluated using the multiplication of the index of economic freedom and the state fragility index, as two indices, most fully characterizing the disjoint groups of the institutions. To achieve the main goal of the study, we accomplish the econometric modeling based on data from the World Bank, the Heritage Foundation and the Fund for Peace from 1995 to 2015. As the main tool of econometric analysis, a panel regression with fixed effects is used and the technique of a two-step least-squares regression analysis method with instrumental variables is used to solve a possible endogeneity problem in the model. As a result of the study, an assessment of the overall impact of institutional factors through the composition of indices was carried out and a hypothesis about the positive impact of institutional factors on the inflow of foreign direct investment in developing countries was confirmed.

scholarly journals Dynamic Causal Relationships among GDP, Exports, and Foreign Direct Investment (FDI) in the Developing Countries

2013 ◽  
Vol 14 ◽  
pp. 1-19 ◽  
Author(s):  
Mohsen Mehrara ◽  
Amin Haghnejad ◽  
Jalal Dehnavi ◽  
Fereshteh Jandaghi Meybodi
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Foreign Direct Investment ◽  
Strong Evidence ◽  
Direct Investment ◽  
The Other ◽  
Fdi Inflows ◽  
Long Run ◽  
Short Run ◽  
Growth Hypothesis

Using panel techniques, this paper estimates the causality among economic growth, exports, and Foreign Direct Investment (FDI) inflows for developing countries over the period of 1980 to 2008. The study indicates that; firstly, there is strong evidence of bidirectional causality between economic growth and FDI inflows. Secondly, the exports-led growth hypothesis is supported by the finding of unidirectional causality running from exports to economic growth in both the short-run and the long-run. Thirdly, export is not Granger caused by economic growth and FDI inflow in either the short run or the long run. On the basis of the obtained results, it is recommended that outward-oriented strategies and policies of attracting FDI be pursued by developing countries to achieve higher rates of economic growth. On the other hand, the countries can increase FDI inflows by stimulating their economic growth.

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