The Relationship Between Foreign Direct Investment and Financial Development in OECD Countries

2020 ◽  
pp. 206-226
Author(s):  
Metin Gürler ◽  
Funda Kara
Keyword(s):  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Fixed Effects ◽  
Oecd Countries ◽  
Fixed Effects Model ◽  
Causality Test ◽  
Section Data ◽  
Main Determinants ◽  
The Relationship

This chapter investigates the relationship between the OECD-FRRI issued by OECD and IMF-FDI issued by IMF for 36 OECD member countries. Cross-section data (CSD) analysis and panel data (PD) analysis consisting of random and fixed effects estimations were used in the study to investigate the relationship between Foreign Direct Investment (FDI) and Financial Development for OECD countries for the years 1997, 2003, and 2006 and the 7-year period of 2010-2016. Granger Causality Test (GCT) is also applied to test the direction of causality between two indicators. According to the Random Effects Model (RAM) and Fixed Effects Model (FEM) with PD analysis in the study OECD-FRRI is found as one of the determinants of IMF-FDI and IMF-FDI is found as one of the determinants of OECD-FRRI in OECD member countries. For CSD analysis, there is no significant proof to say OECD-FRRI is one of the main determinants of IMF-FDI and IMF-FDI is one of the determinants of OECD-FRRI in OECD member countries. For CSD, OECD-FRRI does not cause IMF-FDI whereas IMF-FDI causes OECD-FRRI.

The Impact of Foreign Direct Investment on Home Country Exports

2018 ◽  
Vol 09 (01n02) ◽  
pp. 1850005
Author(s):  
Vera Silva ◽  
Rosa Forte
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Fixed Effects ◽  
Manufacturing Industry ◽  
Home Country ◽  
Theoretical Point ◽  
Fixed Effects Model ◽  
Entry Modes ◽  
The Impact ◽  
The Relationship

Exports and foreign direct investment (FDI) are two alternative foreign markets entry modes. From a theoretical point of view, there are arguments which support two different relationships between FDI and exports: complementary and substitution. Most empirical studies, however, have concluded with a complementary relationship. Since existing studies at more disaggregated levels have focused solely on the manufacturing industry, this paper aims at studying the relationship between FDI and home country exports based on a large sample of Portuguese firms, belonging to manufacturing and services, for the period 2006–2012. Using a fixed-effects model, results obtained suggest that the control of heterogeneity between firms is essential to clarify the relationship between FDI and exports and this has been a factor often overlooked.

Higher education, gender, and foreign direct investment: Evidence from OECD countries

2021 ◽  
pp. 095042222199727
Author(s):  
George Pantelopoulos
Keyword(s):  
Higher Education ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Tertiary Education ◽  
Labour Force ◽  
Oecd Countries ◽  
Educational Levels ◽  
Education Statistics ◽  
Level Of Significance ◽  
The Relationship

The objective of this study was to explore and empirically investigate the relationship between the labour force across educational levels and foreign direct investment (FDI), and to facilitate comparisons of education statistics and indicators across countries based on uniform and internationally agreed definitions. The analysis focuses on OECD countries. The empirical findings suggest that an educated labour force positively affects inward FDI. However, different educational levels do not have the same level of significance; tertiary education appears to have the greatest influence. As far as gender is concerned, the level of female participation in the workforce seems to be crucial in attracting FDI, and governments should therefore adopt policies to promote women’s empowerment.

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 The Dynamics of Foreign Direct Investment in BRICS Countries

2017 ◽  
Vol 9 (3(J)) ◽  
pp. 101-112
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Fixed Effects ◽  
Trade Openness ◽  
Human Capital Development ◽  
Brics Countries ◽  
Capital Development

Recent studies which investigated the determinants of foreign direct investment (FDI) in BRICS include Hsin-Hong and Shou-Ronne (2012), Nandi (2012), Jadhav (2012), Darzini and Amirmojahedi (2013), Nischith (2013), Ho et al. (2013), Kaur et al. (2013) and Priya and Archana (2014). The findings from these studies shows lack of consensus and confirm that a list of agreeable determinants of FDI in BRICS countries is still an unsettled matter. This paper was therefore initiated in order to contribute to the debate on the discourse on FDI determinants in BRICS countries.This paper deviates from earlier similar studies in five ways: (1) uses most recent data, (2) is the first to investigate whether a combination of financial development, trade openness, human capital, economic growth and inflation influence FDI in BRICS countries, (3) uses different proxies of the variables that affect FDI, (4) employed both fixed effects and pooled ordinary least squares (OLS) approaches and (5) used a stacked data approach.The results of the study showed that economic growth, trade openness and exchange rate stability positively impacted on FDI, financial development positively influenced FDI under fixed effects, FDI was positively influenced by human capital development using the pooled OLS and inflation negatively affected FDI in line with literature. Taking into account these findings, this study urges BRICS to implement policies that increase financial sector efficiency and economic growth, maintain stable exchange rates, keep inflation rates at lower levels, enhance trade openness and human capital development in order to increase FDI inflows.

The Role of Financial Development in the Relationship Between Foreign Direct Investment and Economic Growth: A Nonlinear Approach

2019 ◽  
Vol 22 (02) ◽  
pp. 1950009 ◽  
Author(s):  
Elya Nabila Abdul Bahri ◽  
Abu Hassan Shaari Md Nor ◽  
Tamat Sarmidi ◽  
Nor Hakimah Haji Mohd Nor
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Global Financial Crisis ◽  
Using Data ◽  
Relationship Of ◽  
The Relationship

Financial development is recognized as an absorptive capacity in the relationship between foreign direct investment (FDI) and economic growth. Therefore, FDI effect on economic growth is contingent with the level of financial development. However, existing studies also show that financial development dampens economic growth through the “too much finance harms economic growth” hypothesis. Hence, there is a question of how far financial development should be developed to optimize the benefits of FDI on economic growth. The novelty of this study is that it reexamines the role of financial development in FDI-growth relationship by including the interaction term between FDI and the nonlinearity of financial development on economic growth in the period following the 2007–2008 Global Financial Crisis. Interestingly, our results demonstrate that the nonlinear relationship of financial development on economic growth is a U-shaped curve by using data from the 2009–2013 period, for 65 developing countries, which contrast the findings from previous studies. The absorptive capacity effects work nonlinearly, in that FDI accelerates growth after reaching a certain level of financial development, and that the positive effect originates from a minimum level. The study thus suggests that the level of financial development needs to be increased since it serves as a form of absorptive capacity enabling the positive growth effects of FDI in the recipient countries.

scholarly journals The Impact of Foreign Direct Investment on Trade (Export and Import) in Turkey

2019 ◽  
Vol 5 (1) ◽  
pp. 6
Author(s):  
Mehman Karimov
Keyword(s):  
Foreign Direct Investment ◽  
International Trade ◽  
Granger Causality ◽  
Direct Investment ◽  
Empirical Studies ◽  
Causality Test ◽  
Lag Selection ◽  
Causality Tests ◽  
The Impact ◽  
The Relationship

It is said that after globalization processes foreign direct investment start to influence trade moreover it is very complicated to deduce the relationship between trade and FDI according to theoretical analysis. Therefore, empirical studies showed that until the 1980s international trade generated direct investment but after 1980s FDI started to heavily influencing international trade. Also, results showed that the relationship can differ from one country to another. Thus, this paper is aimed to analyze the impact of Foreign Direct Investment inflow on the macroeconomic variable as a Trade (Export, Import) in Turkey. The paper covers the time period from 1974 to 2017. The time series datasets, those are obtained from World Bank and IMF database are utilized in employed statistical models as ADF Unit Root, VAR lag selection, Johansen co-integration, and the Granger Causality tests, to fulfill empirical part of the paper. Based on results, it was confirmed that there was the presence of the co-integration between analyzed series. Additionally, results of Granger causality test showed that there is unidirectional causality from Export and Import to FDI.

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 Determinan Aliran Masuk Foreign Direct Investment ke Negara-Negara Berpendapatan Rendah

2020 ◽  
Vol 7 (2) ◽  
pp. 174-188
Author(s):  
Rully Aprianto ◽  
Alla Asmara ◽  
Sahara
Keyword(s):  
Foreign Direct Investment ◽  
Random Effects ◽  
Direct Investment ◽  
Fixed Effects ◽  
Fixed Effects Model ◽  
Model Data

Modal merupakan faktor penting yang mendorong pertumbuhan ekonomi dan pembangunan. Investasi asing langsung (foreign direct investment – FDI) adalah salah satu bentuk modal terbaik dalam pembiayaan dan investasi proyek industri. Oleh karena itu, adalah hal yang penting untuk mengidentifikasi faktor-faktor yang memengaruhi FDI dan untuk menentukan tingkat pengaruh masing-masing untuk membuat kebijakan yang tepat di bidang ini. Penelitian ini menganalisis faktor-faktor penentu FDI di negara dengan pendapatan per kapita rendah. Analisis didasarkan pada sampel dari 10 negara berpendapatan rendah. Dengan menggunakan model data panel, digunakan tiga pendekatan, yaitu common model, random effects dan fixed effects model, untuk mengidentifikasi faktor-faktor yang memengaruhi FDI di negara-negara ini. Hasil penelitian menunjukkan faktor-faktor yang berpengaruh secara signifikan terhadap aliran masuk FDI ke negara-negara dengan tingkat pendapatan rendah adalah PDB (ukuran pasar), inflasi, produktivitas tenaga kerja, infrastruktur, keterbukaan perdagangan, dan stabilitas politik. Sementara kualitas kebijakan dan peraturan tidak berpengaruh secara signifikan.

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