The Impact of Asian Foreign Direct Investment, Trade on Africa’s Economic Growth

2017 ◽  
Vol 3 (1) ◽  
pp. 72-85 ◽  
Author(s):  
Modou Diouf ◽  
Yun Liu Hai
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
West African ◽  
African Countries ◽  
Market Opportunities ◽  
The Impact

Globalization of capital and especially foreign direct investment (FDI) and trade has increased dramatically over the past decades. In developing economies; FDI has become the most stable and largest component of capital flows. This study examines the interaction between FDI, trade openness and economic growth with a focus on Asian FDI, trade and 13 West African countries for the period 1980-2015. The results from weighted Fully Modified Ordinary Least Squares (FMOLS) show that both FDI and trade significantly contribute to economic growth. The study also indicates that a unidirectional causality runs from FDI to economic growth indicating FDI-growth-led hypothesis while a bidirectional causality is detected between trade and economic growth validating feedback-effect. Increasing FDI could also promote trade by opening and expanding market opportunities.

scholarly journals Exploration of the Impact of China’s Outward Foreign Direct Investment (FDI) on Economic Growth in Asia and North Africa along the Belt and Road (B&R) Initiative

2021 ◽  
Vol 13 (4) ◽  
pp. 1623
Author(s):  
Alnoah Abdulsalam ◽  
Helian Xu ◽  
Waqar Ameer ◽  
AL-Barakani Abdo ◽  
Jiejin Xia
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Host Countries ◽  
African Countries ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

This empirical study has examined the impact of Chinese investments, namely infrastructure, energy, services, other investment sectors, and trade openness on the economies of the 25 Asian and North African countries along with the Belt and Road (B&R) Initiative for a period of 2007 to 2016 using the Johansen Fisher Panel Cointegration Test, Panel Dynamic Ordinary Least Squares (PDOLS) model, and the Toda and Yamamoto technique for testing causality. The findings revealed cointegration among the variables and that the impact of Chinese investments on economic growth in the host countries is positive, but it has a weaker effect, to a certain extent, in all sectors of the host countries while trade openness positively impacts the countries. Furthermore, there is evidence of a unidirectional causality between some FDI (foreign direct investment) economies while the investment in services and other sectors does not cause economic growth in the host countries. Based on the results, the paper proposes that the host countries increase the FDI in the sector of infrastructure, energy, and technology to enhance their economies.

scholarly journals The Impact of Foreign Direct Investment on the Economic Growth of South Caucasus Countries

2021 ◽  
Vol 17 (35) ◽  
pp. 38
Author(s):  
Lela Scholer-Iordanashvil
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
South Caucasus ◽  
Gdp Growth Rate ◽  
Using Data ◽  
Classical Linear Regression ◽  
The Impact

This paper focuses on the effects of foreign direct investment inflows on the economic growth in a panel of three South Caucasus countries using data from 1996-2019 periods. In this study, we applied the following control variables; trade openness, investment, real exchange rate, and population growth. Classical linear regression model was employed in this paper. Ordinary least squares methods are used for estimation. Empirical results revealed that there is no significant effect of FDI inflows on economic growth. The results show that inward FDI stock-to-GDP ratio and real GDP growth rate are positively correlated.

scholarly journals Impact of Trade Openness on Economic Growth: A Case Study of Pakistan'

2017 ◽  
Vol 3 (1) ◽  
pp. 57-68
Author(s):  
Rashid Ahmad ◽  
Kashif Raza ◽  
Sobia Saher
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Negative Impact ◽  
Trade Openness ◽  
Capital Formation ◽  
Fixed Capital ◽  
Series Data ◽  
Fixed Capital Formation ◽  
The Impact

Purpose: This paper estimates the impact of trade openness and economic growth in Pakistan by using time series data from period of 1975-2014. Econometric method was applied to estimate the impact of trade openness on economic growth. Gross fixed capital formation (proxy of investment), Foreign direct investment, Imports, Exports & trade openness (proxy of trade openness to check the volume of trade of a country) is used as explanatory variables while gross domestic product is treated as dependent variable in this study. Johansson co. integration approach developed by Johannes & Jeslius (1988) is used to evaluate the long run relationship among variables in this study. The results suggest that trade openness, imports, exports and foreign direct investment cast have positive impact on economic growth while on the other hand; gross fixed capital formation &labor force has negative impact on economic growth.

scholarly journals Trade openness and foreign direct investment in Africa

2014 ◽  
Vol 9 (3) ◽  
pp. 355-370 ◽  
Author(s):  
T Kandiero ◽  
M Chitiga
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Empirical Work ◽  
African Countries ◽  
Fdi Inflows ◽  
Services Sector ◽  
Openness To Trade ◽  
The Impact ◽  
Poor Infrastructure

Africa’s share of foreign direct investment (FDI) has lagged behind other regions in the world, despite a sharp increase in FDI inflows to the region in 2001. Factors contributing to this circumstance include perceptions of high corruption, weak governance and poor infrastructure. The motivation of this paper is to investigate the impact of openness to trade on the FDI inflow to Africa. In addition to economy-wide trade openness, we also analyse the impact on FDI of openness in manufactured goods, primary commodities and services. The empirical work uses cross-country data from selected African countries observed over four periods: 1980-1985, 1985-1990, 1990- 1995 and 1995-2001. We find that the FDI to GDP ratio responds well to increased openness in the whole economy and in the services sector in particular.

scholarly journals The Impact of FDI on Economic Growth in Case of Romania

2020 ◽  
Vol 12 (12) ◽  
pp. 81
Author(s):  
Alina Mihaela Ciobanu
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Labor Force ◽  
Direct Investment ◽  
Trade Openness ◽  
Causality Test ◽  
Long Run ◽  
Main Determinants ◽  
The Impact ◽  
Determinants Of Economic Growth

Foreign direct investment flows had increased worldwide over the last decades and many specialists think that there is a strong correlation among trade, FDI, labor force, and economic growth in the receiving countries. Based on available statistical data, we will examine the effects of FDI on GDP growth and the causality relations between GDP, trade openness, labor force, and FDI in case of Romania for the last decades. The ARDL bound testing approach is used to study the existence of a long-run relationship between FDI, trade, labor, and economic growth. Then the error-correction based Granger causality test is used to test the direction of causality between the variables. The results revealed that there is cointegration among the variables when real GDP and foreign direct investment are the dependent variables. Foreign direct investment, trade openness, and labor force are the main determinants of economic growth in the long run in Romania. In addition, the increase of gross domestic product, exports, imports and labor force promote foreign direct investment in the long run.

scholarly journals The Impact of Foreign Direct Investment on Economic Growth in Nigeria

2015 ◽  
Vol 7 (4) ◽  
pp. 90-97
Author(s):  
Sani Ali Ibrahim
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Time Series Data ◽  
Empirical Studies ◽  
Trade Openness ◽  
National Income ◽  
Series Data ◽  
Long Run ◽  
The Impact

The economic development performance can be used to measure the economic growth of a given country. In economic analysis, a country can attain economic growth through the growth in national income measurement. However, there were rigorous discussions on the role of foreign direct investment (FDI) on economic growth and continued to be a topic of discussion on the contemporary economy. This paper serves as an extension to the previous empirical studies on the issue by providing some evidence from time series data for the period 1971 to 2013 of Nigeria. The primary aim of this study is to analyze the impact of FDI on economic growth of Nigeria taking trade openness, Gross Fixed Capital Formation and human capital as control variables. To investigate the long run equilibrium relationship, Johansen and Juselius co-integration approach is analyzed, while the speed of adjustment in the short run is analyzed through the use of VECM method. In Nigeria, FDI, GFCF and HK have long run relationship with economic growth. However, the coefficient of ECM in Nigeria is statistically significant at 1% level of significance. Thus, 10.8% of the adjustment is achieved due to the correction of the adjustment speed in a year.

scholarly journals Foreign investment & growth in emerging economies: panel ARDL analysis

2019 ◽  
Vol 22 (2) ◽  
Author(s):  
Michael Appiah
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Positive Impact ◽  
Trade Openness ◽  
Positive Sign ◽  
Panel Ardl ◽  
Employment Conditions

The contributory role of foreign investment on growth in Africa recent years has received much consideration by researchers and policy makers. Studies on this area available are not clear. In most recent studies, foreign direct investment has emerged as a determining factor of economic growth. In light of this fact, the current study is an attempt to investigate the contributions of foreign direct investment on economic growth in developing economies of Africa. This study uses yearly panel data for the period 1995-2015 for 5 developing economies of Africa. The results of Panel ARDL indicate that foreign direct investment has positive impact on economic growth as well as a positive sign of trade openness, inflation and labor. The study stresses that for increasing economic growth there is a need to seek more foreign investments, increase trade openness and inflation at the same time improve upon employment conditions in selected African developing countries.

scholarly journals The Impact of Foreign Direct Investment, Capital Formation, Inflation, Money Supply and Trade Openness on Economic Growth of Asian Countries

2020 ◽  
Vol 2 (1) ◽  
pp. 25-34
Author(s):  
Xiuyun Yang ◽  
Muhammad Nouman Shafiq
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Money Supply ◽  
Direct Investment ◽  
Fixed Effects ◽  
Trade Openness ◽  
Capital Formation ◽  
Fixed Effects Model ◽  
Asian Countries ◽  
The Impact

Economic growth is currently an essential phenomenon for emerging countries worldwide and has gained the researchers' intentions. Thus, the current study aims to examine the role of foreign direct investment (FDI), capital formation, inflation, money supply, and trade openness on the economic growth of Asian countries. The data has been extracted from the twenty emerging Asian countries from 2007 to 2018 using the most popular database named World Development Indicators (WDI). The fixed-effects model, along with the robust standard error, has been used for checking the impact of predictors on the economic growth of Asian countries. The results revealed that the predictors such as FDI, capital formation, money supply, and trade openness have positive association with economic growth, while inflation has a negative association with the economic growth of Asian countries. These findings are suitable for the new arrivals who want to examine this area in the future and for the regular traders who want to develop policies related to economic growth.

On the foreign direct investment–economic growth relationship in Africa: does economic freedom mediate this relationship?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olufemi Adewale Aluko ◽  
Muazu Ibrahim ◽  
Xuan Vinh Vo
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Economic Freedom ◽  
Empirical Literature ◽  
African Countries ◽  
Content Type ◽  
Economic Freedom Index ◽  
Bootstrap Algorithm ◽  
The Impact

PurposeIn this study, the authors examine how economic freedom mediates the impact of foreign direct investment (FDI) on economic growth in Africa.Design/methodology/approachBy using data from 41 countries over the period 2000–2017, the authors invoke Seo and Shin's (2016) sample splitting approach while relying on the recently developed Seo et al.'s (2019) computationally robust bootstrap algorithm to achieve the purpose of this study.FindingsThe authors find evidence of economic freedom threshold that bifurcates the link between FDI and economic growth in Africa. More precisely, FDI does not improve overall economic growth for African countries whose economic freedom index is below the estimated threshold while significantly spurring growth for African countries with economic freedom above this threshold.Practical implicationsAfrican countries need to strive towards improving their level of economic freedom through the strengthening of rule of law, reducing government size, promoting regulatory efficiency and further opening of the goods and capital markets.Originality/valueThe association between FDI and economic growth has been well documented. While the positive theoretical postulations are almost conclusive, empirical literature on the precise effect of FDI remains contentious and far from being settled. What is missing in the existing literature in Africa is whether countries' level of economic freedom mediates how FDI explains the variations in economic growth across African countries. The authors fill this research gap.

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