scholarly journals The effect of foreign direct investment on financial development

2019 ◽  
Vol 70 (1) ◽  
pp. 22-40
Author(s):  
Ayman Abdalmajeed Alsmadi ◽  
Mohammad Salem Oudat
Keyword(s):  
Financial Development ◽  
Arab Spring ◽  
Negative Relationship ◽  
Foreign Direct Investments ◽  
Causality Test ◽  
Political Conflicts ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Significant Negative Relationship ◽  
Causality Relationship

The aim of this paper is to analyze the relationship between foreign direct investments and financial development in Bahrain. The estimation financial development effects was performed for the period 1978 to 2015, which covers the political conflicts that recently happened in Middle East area (Arab Spring). On the other hand, the paper sought to examine the causality relationship between foreign direct investments and financial development. The study empirically investigates the short and long run equilibrium relationship between the variables by applied co-integration and Autoregressive Distributed Lags Approach (ARDL). The Granger causality test was employed to capture causality relationship. The obtained results show that there is a significant positive relationship between FDI and financial development in short and long run, while, a significant negative relationship between Arab Spring and financial development. However, the results also revealed bidirectional causality relationship between FDI and financial development.

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.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

scholarly journals Foreign Direct Investment, Financial Development and Economic Growth Evidence from Saudi Arabia

2017 ◽  
Vol 8 (4) ◽  
pp. 228 ◽  
Author(s):  
Najeeb Muhammad Nasir ◽  
Mohammed Ziaur Rehman ◽  
Nasir Ali
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Impulse Response Function ◽  
Saudi Arabian ◽  
Causality Test ◽  
Long Run ◽  
Oil Resources ◽  
Integration Test

This study is an effort to explain and establish a relationship among foreign direct investment, financial development and economic growth in Saudi Arabian context for the period of 1970 to 2015 by employing Vector Auto Regression (VAR) and modified Granger Casualty Models. The result of Johansen co-integration test illustrates that no long run co-integration can be established among the variables. VAR has established a link between economic growth, financial development and foreign direct investment. The Granger causality test also confirms that economic growth causes foreign direct investment and financial development which is a unidirectional causality running from economic growth towards foreign direct investment and financial development. No significant causality can be observed empirically between foreign direct investment and financial development. This feature can be attributed to the fact that Saudi Arabian economy is still heavily dependent on its oil resources which is the driving force behind growth. Impulse Response Function has been utilized in order to observe the response to the shocks among the variables.

scholarly journals FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests

2020 ◽  
Vol 12 (3) ◽  
pp. 47-63
Author(s):  
Vlatka Bilas ◽  
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
European Union ◽  
Annual Data ◽  
Foreign Direct Investments ◽  
Causality Test ◽  
Panel Ardl ◽  
Long Run ◽  
Causality Tests ◽  
The Relationship

Foreign direct investments are seen as a prerequisite for gaining and maintaining competitiveness. The research objective of this study is to examine the relationship between foreign direct investment (FDI) and economic growth in “new” European Union member countries using various unit root, cointegration, as well as causality tests. The paper employs annual data for FDI and gross domestic product (GDP) from 2002 to 2018 for the 13 most recent members of European Union (EU13): Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. An estimated panel ARDL (PMG) model found evidence that there is a long-run equilibrium between the LogGDP, LogFDI and LogFDIP series, with the rate of adjustment back to equilibrium between 3.27% and 20.67%. In the case of the LogFDI series, long-run coefficients are highly statistically significant in all four models, varying between 0.0828 and 0.3019. These coefficients indicate that a 1% increase in LogFDI increases LogGDP between 0.0828% and 0.3019%. Results of a Dumitrescu-Hurlin panel causality test indicated that a relationship between the GDP growth rate and FDI growth rate is only indirect. Finally, only weak evidence was shown that FDI had a statistically significant impact on GDP in the EU13 countries over the period 2002-2018. This report of findings contributes to the literature concerning FDI and economic growth, namely regarding the current understanding of the relationship between these two factors.

scholarly journals The causal relationship between current account and financial account balance in Western Balkan countries: The case of Serbia

Bankarstvo ◽  
2020 ◽  
Vol 49 (4) ◽  
pp. 9-41
Author(s):  
Radovan Kovačević
Keyword(s):  
Current Account ◽  
Global Financial Crisis ◽  
Western Balkans ◽  
Causality Test ◽  
Vec Model ◽  
Long Run ◽  
Financial Account ◽  
Causality Relationship ◽  
Johansen Cointegration Test ◽  
The Global Financial Crisis

The Western Balkans (WB) countries registered an increase in the current account (CA) deficit and net capital inflow in the period before the outbreak of the global financial crisis of 2008. The external debt of these countries has increased. The aim of this paper is to examine the causality relationship between the CA and financial accounts (FA) balance of Serbia. A framework for the empirical analysis is the vector autoregression (VAR) model and the vector error correction (VEC) model. Using the Johansen cointegration test, we find the existence of a long-run causality relationship between these two variables. The estimated long-run coefficient on the FA variable as an independent variable shows that an increase of Serbia's FA balance by 1% leads to an increase in the CA deficit of Serbia by 0.58%. Applying the Granger causality test, it was found that causality runs from FA to the CA, which implies recommendations for economic policymakers. The finding indicates the need to continuously check the sustainability of the CA deficit of Serbia, as well as to monitor the level of presence of foreign capital in the Serbian economy.

scholarly journals Relationship Economic Growth with Foreign Direct Investment

2020 ◽  
Vol 3 (3) ◽  
pp. 49-68
Author(s):  
Prince Charles Heston Runtunuwu
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Positive Impact ◽  
Secondary Data ◽  
Causality Test ◽  
Long Run ◽  
Causality Relationship ◽  
The One

This study aims to determine the one-way causality relationship between foreign investment and economic growth, a one-way causality relationship between economic growth and foreign investment, and a two-way causality relationship between foreign investment and economic growth in Indonesia. This was conducted in Indonesia, the data are secondary data taken using the method time series from 1971 to 2018 from the official websites, the Investment Coordinating Board, and literature sources, Foreign Investment and Gross Domestic Product. (1) in the long run the Economic Growth variable has a significant effect on Foreign Direct Investment, and vice versa; and (2) the Foreign Direct Investment variable has a significant effect on Economic Growth; (3) in the short term, the Economic Growth variable has an influence on Foreign Direct Investment, and vice versa; and the Foreign Direct Investment variable has an influence on Economic Growth. It is possible to have a better long-term relationship, bringing positive impact on economic growth in Indonesia when investment in Indonesia increases. Conversely, when economic growth decreases, it means that foreign investment is also low. Granger Causality test, shows a two-way causality relationship between Economic Growth and Foreign Direct Investment and vice versa. It is necessary to maintain growth to attract foreign direct investment, as well as foreign investment. Investment climate needs to be improved enabling to invest in Indonesia.

scholarly journals THE EFFECT OF SAVING AND CAPITAL EXPANSION ON FINANCIAL AND TECHNOLOGICAL DEVELOPMENT IN GCC COUNTRIES

2021 ◽  
Vol 0 (0) ◽  
pp. 1-25
Author(s):  
Faris Alshubiri
Keyword(s):  
Least Squares ◽  
Financial Development ◽  
Technological Development ◽  
National Income ◽  
Ordinary Least Squares ◽  
Growth Strategy ◽  
Causality Test ◽  
Gcc Countries ◽  
Causal Direction ◽  
Long Run

This study examined the effect of the relationship between saving and capital expansion on financial and technological development in three GCC countries using panel data from 1990 to 2019. The study used panel least squares, feasible general least squares, dynamic ordinary least squares and fully modified ordinary least squares used in the study. The findings showed that there was a significant positive long-run relationship between capital expansion and financial development and was a positive and insignificant long-run relationship between saving and financial development. Conversely, the study showed that there was a significant positive long-run relationship between saving and technological development. Meanwhile, there was a negative long-run relationship between capital expansion and technological development. Pairwise Granger causality test results showed that there was bidirectional causality between saving and financial development, a single causal direction from Adjusted net national income and financial development and a single causal direction from technological development and saving and Inflation, consumer prices. The main conclusions of the study were saving tends to support technological development, while investment tends to improve financial development. Therefore, GCC countries should formulate a long-term growth strategy in all sectors to determine their development requirements in light of the available resources.

Exports, financial development and economic growth in Pakistan

2014 ◽  
Vol 13 (2) ◽  
pp. 155-170 ◽  
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Error Correction Model ◽  
Causality Analysis ◽  
Bounds Testing ◽  
Causality Test ◽  
Correction Model ◽  
Content Type ◽  
Long Run

Purpose – This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan. Design/methodology/approach – The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach. Findings – The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. Originality/value – This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.

scholarly journals Agricultural exports and the growth of agriculture in India

2013 ◽  
Vol 59 (No. 5) ◽  
pp. 211-218 ◽  
Author(s):  
O. Ramphul
Keyword(s):  
Gross Domestic Product ◽  
Causal Link ◽  
Domestic Product ◽  
Bounds Testing ◽  
Causality Test ◽  
Vector Error Correction ◽  
Agricultural Exports ◽  
Distributed Lag ◽  
Long Run ◽  
Equilibrium Relationship

The study empirically investigates the causality between agricultural exports and gross domestic product (GDP) agriculture in India using the Granger causality test via Vector Error-Correction Model over the period 1970–1971 to 2009–2010. The results of unit-root tests suggest that the series of India’s GDP agriculture and farm exports are integrated of order one. The results of the Auto Regressive Distributed Lag bounds testing approach to co-integration show that there is a positive and stable long-run equilibrium relationship between India’s agricultural exports and GDP of agriculture. We find a unidirectional causal link running from farm exports to gross domestic product of agriculture. It indicates that in India, agricultural products export Granger causes the growth in GDP of agriculture, which supports the export-led growth hypothesis. It is suggested that in order to accelerate the agricultural growth rate in India, there is a need to implement the policies encouraging the agricultural exports.  

scholarly journals Coal Consumption and Environmental Sustainability in South Africa: The role of Financial Development and Globalization

2021 ◽  
Vol 10 (3) ◽  
pp. 527-536
Author(s):  
Tomiwa Sunday Adebayo ◽  
Dervis Kirikkaleli ◽  
Ibrahim Adeshola ◽  
Dokun Oluwajana ◽  
Gbenga Daniel Akinsola ◽  
...  
Keyword(s):  
South Africa ◽  
Frequency Domain ◽  
Financial Development ◽  
Environmental Degradation ◽  
Environmental Sustainability ◽  
Ordinary Least Squares ◽  
Coal Consumption ◽  
Causality Test ◽  
Significance Level ◽  
Long Run

This paper aims to investigate coal consumption and environmental sustainability in South Africa by examining the role of financial development and globalization by using a dataset covering the period from 1980 to 2017. The study utilized the Auto-regressive Distributed Lag Model (ARDL) approach in addition to the Bayer and Hank combined co-integration, fully modified Ordinary least squares (FMOLS), and Dynamic ordinary least Squares (DOLS). The study further utilized the frequency domain causality test to capture the causal linkage between the series. The advantage of the frequency domain causality is that it can capture causal linkages between series at different periods. The Bayer and Hanck co-integration and ARDL bounds tests reveal co-integration among the series. The empirical findings based on the ARDL long-run estimation reveal that a 1% increase in coal consumption increases environmental degradation by 1.077%, while a 1% increase in financial development decreases the environmental degradation by 0.973%. Furthermore, a 1% increase in economic growth decreases environmental quality by 1.449%. The outcomes of the FMOLS and DOLS approaches also provide supportive evidence for the ARDL long-run results. Furthermore, the results of the frequency domain causality test reveal that at a significance level of 1%, coal consumption Granger causes CO2 emissions at different frequencies, while financial development Granger causes CO2 emissions in the long run and short run at a significance level of 10%. In terms of policy suggestions, South Africa should embrace policies that encourage energy consumers to shift toward renewable energy. Furthermore, financial reforms should be implemented to curb environmental degradation

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