scholarly journals Determinants of Foreign Direct Investment: New Granger Causality Evidence from Asian and African Economies

2016 ◽  
Vol 8 (1(J)) ◽  
pp. 104-119
Author(s):  
Olawumi D Awolusi ◽  
Theuns G Pelser ◽  
Adedeji Saidi Adelekan
Keyword(s):  
Foreign Direct Investment ◽  
Granger Causality ◽  
Monetary Union ◽  
Significant Relationship ◽  
Direct Investment ◽  
Trade Openness ◽  
Market Size ◽  
Fdi Inflows ◽  
Infrastructural Development ◽  
Macroeconomic Condition

Previous studies on the determinants of foreign direct investment (FDI) have predominantly focused on developed and emerging economies. However, there seem to be few studies concentrating on a comparative analysis of vast African and Asian countries. This paper analysed drivers of foreign direct investments (FDI) to Asian and African economies using a panel dataset from 1980 to 2013.This study used Granger causality test, under vector error correction modelling (VECM) to test for causality among the variables. While the drivers of FDI inflows were measured using five dimensions as proposed by Anyanwu; the dependent variable, FDI inflows, was proxied by the ratio of FDI flows to gross domestic product (GDP). Findings revealed that variables manifesting the determinants of FDI inflows positively affected FDI into these continents. Specifically, factors such as trade openness, macroeconomic condition, infrastructural development, and monetary union have positive and significant effect on FDI to Asian economies. No significant relationship was found between FDI inflows and market size to the Asian continent during the study period. On the other hand, trade openness, macroeconomic condition, market size and infrastructural development have positive and significant effects on FDI inflows to African economies although there was no significant relationship between FDI inflows and monetary union to the African continent during the study period. In fact, there were bi-directional relationships between FDI inflows and some of the determinants in both continents. Theoretically, this model provides predictive implications on improved FDI inflows, given the activities of critical variables manifesting as determinants of FDI inflows.

Determinants of Foreign Direct Investment in Australia

2013 ◽  
Vol 03 (08) ◽  
pp. 20-30
Author(s):  
Sauwaluck Koojaroenprasit
Keyword(s):  
Foreign Direct Investment ◽  
Research And Development ◽  
Exchange Rates ◽  
Significant Relationship ◽  
Direct Investment ◽  
Market Size ◽  
Corporate Tax ◽  
Fdi Inflows ◽  
Tax Rate ◽  
Significant Relationships

Determinants of Foreign Direct Investment (FDI) in Australia were analyzed from 1986 to 2011, based on data availability. The determinants considered FDI inflows according to aggregate FDI inflows and FDI inflows by the top three source countries (USA, UK and Japan). Empirical studies identified four results. (1) For the determinants of FDI in Australia, a larger market size will attract more FDI, whereas more openness and a higher corporate tax rate will discourage FDI inflows into Australia. Lower customs duty and lower interest and depreciation of exchange rates will attract more FDI. The relationship between FDI inflows into Australia and wages was not significant. (2) For the determinants of US inward FDI in Australia, a larger market size will attract more US inward FDI in Australia, whereas more openness and an appreciation of the exchange rate will discourage US inward FDI in Australia. A negative and significant relationship was obtained between customs duty and US inward FDI in Australia. There were positive and significant relationships between US inward FDI in Australia and both the interest and corporate tax rates. (3) For the determinants of UK inward FDI in Australia, greater research and development in Australia will attract more UK inward FDI in Australia, whereas a higher corporate tax rate will discourage UK inward FDI in Australia. The positive relationship between market size and UK inward FDI in Australia was not significant. Openness, customs duty and inflation did not have significant relationships with UK inward FDI in Australia. (4) For the determinants of Japanese inward FDI in Australia, higher wages and greater research and development will attract more Japanese inward FDI in Australia, whereas higher customs duty and a higher corporate tax rate will discourage Japanese inward FDI in Australia. There was no significant relationship between Japanese inward FDI in Australia and either the interest or exchange rates.

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.

Effects of Infrastructure Development on Foreign Direct Investment in Kenya

2016 ◽  
Vol 8 (2) ◽  
pp. 93-110 ◽  
Author(s):  
Carol Teresa Wekesa ◽  
Nelson H. Wawire ◽  
George Kosimbei
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Time Series Data ◽  
Trade Openness ◽  
Transport Infrastructure ◽  
Series Data ◽  
Infrastructure Development ◽  
Fdi Inflows ◽  
Year 2000 ◽  
Quality Infrastructure

Kenya’s foreign direct investment (FDI) inflows as a percentage of GDP have been increasing negligibly over the last 4 years, increasing from 0.4 per cent in 2010 to 0.9 per cent in 2013. And yet evidence shows that quality infrastructure lowers the cost of doing business and thus attracts FDI. Kenya has visible signs of infrastructure inadequacy and inefficiencies despite the fact that since the year 2000, there has been increased budgetary allocation to the infrastructure sector. This study, therefore, sought to determine the effects of transport, energy, communication and water and waste infrastructure development on FDI inflows in Kenya. The study used annual time series data sourced from Central Bank of Kenya, World Bank and the United Nations Conference on Trade and Development (UNCTAD). Using multiple regression analysis, it was established that improved transport infrastructure, communication infrastructure, water and waste infrastructure, exchange rate, economic growth and trade openness are important determinants of FDI inflows into Kenya. Hence, for Kenya to attract more FDI, continued infrastructural development is key since quality infrastructure affords investors a conducive investment climate in which to operate.

scholarly journals Determinant of FDI Inflows in OIC Countries

2021 ◽  
Vol 4 (1) ◽  
Author(s):  
Tania Megasari ◽  
Samsubar Saleh
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Exchange Rates ◽  
Direct Investment ◽  
Trade Openness ◽  
Political Stability ◽  
Fixed Effect Model ◽  
Fdi Inflows ◽  
Macroeconomic Variables ◽  
Effect Model

This study aims to analyze the determinants of foreign direct investment (FDI) in the Organization of Islamic Cooperation (OIC) country members for the period 2005 to 2018 The determinant variables of FDI are corruption, political stability and macroeconomic variables such as inflation, exchange rates, economic growth, and trade openness. Analysis used in the study  is the fixed effect model (FEM) of the OIC data panel.The results showed that economic growth and trade openness had a significant influence on foreign direct investment (FDI), while the effects of corruption, political stability, inflation and the exchange rate have no significant effect on foreign direct investment (FDI).

scholarly journals Trade Openness and Economic Growth Nexus in Pakistan

2020 ◽  
Vol V (III) ◽  
pp. 22-33
Author(s):  
Ghulam Yahya Khan ◽  
Muhammad Masood Anwar ◽  
Aftab Anwar
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Direct Investment ◽  
Trade Openness ◽  
Explanatory Variables ◽  
Integration Approach ◽  
Long Run

This study explores the nexus amongst trade openness and economic growth for Pakistan for 1981-2019. Trade-openness is a dependent variable, and it is measured as imports plus exports to GDP ratio. Economic growth, Foreign Direct Investment, Inflation, Exchange rate, and interest rate are taken as explanatory variables. Co-integration approach by Johansen and Juselius (1988, 1991) has been used for long-run relationships. Results indicate that Trade-Openness has significantly affected the economic growth and other control variables of the study for Pakistan. There exist bidirectional Granger Causality in the selected variables.

scholarly journals The Use of Auto-Regressive Distributed Lag Method in Investigating The Impact of Interest Rate on Foreign Direct Investment in Yemen for the Period 1990-2018

2020 ◽  
Vol 26 (123) ◽  
pp. 145-157
Author(s):  
Saif Sallam Alhakimi
Keyword(s):  
Foreign Direct Investment ◽  
Interest Rate ◽  
Interest Rates ◽  
Direct Investment ◽  
Inflation Rate ◽  
Trade Openness ◽  
Fdi Inflows ◽  
Distributed Lag ◽  
Auto Regressive ◽  
The Impact

 Foreign direct investment has seen increasing interest worldwide, especially in developing economies. However, statistics have shown that Yemen received fluctuating FDI inflows during the period under study. Against this background, this research seeks to determine the relationship and impact of interest rates on FDI flows. The study also found other determinants that greatly affected FDI inflows in Yemen for the period 1990-2018. Study data collected from the World Bank and International Monetary Fund databases. It also ensured that the time series were made balanced and interconnected, and then the Auto Regressive Distributed Lag method used in the analysis. The results showed that the interest rates and inflation rate harmed FDI flows and, therefore, could not be used for policymaking purposes. The research also discovered that GDP growth and trade openness are the main determinants of foreign direct investment in Yemen. Trade openness policies should be encouraged, and GDP growth facilitated if the economy is to achieve long-term FDI flows. Purpose –The purpose of the paper is to discover the impact of interest rate on foreign direct investment with a combination of the exchange rate, inflation, gross domestic product, and trade openness. Design/methodology/approach – The paper implements the Auto Regressive Distributed Lag (ARDL)-Bounds testing approach to analyze maintaining the time series properties in terms of stationarity. Findings – The results indicate that there is a long-run equilibrium between the Foreign Direct Investment and the explanatory variables. Furthermore, the significant factors influencing, positively, FDI in Yemen are Growth domestic product, Exchange rate, and Trade openness. In contrast, both the Interest rate and Inflation rate have a substantial negative impact on Foreign Direct Investment. Practical implications – Policymakers in Yemen advised reconsidering many of the general state policies, including investment policies, financial and administrative governance, and monetary policy that focuses on maintaining an adequate interest rate and reduce the rate of inflation. Originality/value – As for the case of Yemen, this the first study empirically explores the impact of interest rate and the foreign direct investment using the Auto Regressive Distributed Lag method aiming for more reliable results.

Does Foreign Direct Investment Enhance Economic Growth? Evidence from 30 Leading Global Economies

2020 ◽  
Vol 12 (2) ◽  
pp. 217-230
Author(s):  
Andy Titus Okwu ◽  
Isiaq Olasunkanmi Oseni ◽  
Rowland Tochukwu Obiakor
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Youth Unemployment ◽  
Jel Classification ◽  
Fdi Inflows ◽  
Consumer Prices ◽  
Fixed Capital Formation ◽  
Domestic Credit

Investment expenditure is a major component of aggregate macroeconomic variables in any economy, irrespective of the development status. This article employed relevant econometric methodology on panel data environment to analyze the effects of foreign direct investment (FDI) inflows on economic growth of 30 leading global economies during the period between 1998 and 2017. Other variables considered in the analysis were domestic credit to private sector (DCPS), gross fixed capital formation (GFCF), inflation–consumer prices index (INFPC), trade openness (TOPNESS), and youth unemployment (UEMPYT). The results showed mixed growth effects of the variables in general. Specifically, FDI exerted positive and significant effect on economic growth of the countries during the period. Therefore, this article concluded that FDI inflows enhanced economic growth and emphasized the need to foster more FDI-attracting policies as well as adequate GFCF to complement FDIs for sustainable economic growth potentials. JEL Classification: C23, C33, C51, F21, F43, O47.

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.

Dynamics of Economic Growth, Investment and Trade Openness: Evidence from Bangladesh

2017 ◽  
Vol 6 (1) ◽  
pp. 82-104 ◽  
Author(s):  
Champa Bati Dutta ◽  
Mohammed Ziaul Haider ◽  
Debasish Kumar Das
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Granger Causality ◽  
Direct Investment ◽  
Trade Openness ◽  
Jel Classification ◽  
Domestic Investment ◽  
Causality Test ◽  
Vector Error Correction ◽  
Causality Tests

This article investigates the causal relationship among foreign direct investment, domestic investment, trade openness and economic growth in Bangladesh over the period 1976–2014. Unit root tests, cointegration methods and Granger causality tests in Vector Error Correction Model (VECM) framework are used to investigate the relationships. The results of Granger causality test based on a stable VECM support a unidirectional causality running from foreign direct investment to growth, domestic investment to trade openness, growth to trade openness and bidirectional causality between domestic investment and growth and foreign direct investment and domestic investment. The results support the investment complementarities in Bangladesh. JEL Classification: E22, F1, O40

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