How Does Country Risk Matter for Foreign Direct Investment?

Using the overall FDI inflows for 89 countries during the period from 1985 to 2007, we empirically investigate the effects on inward FDI of various components of political and financial risk. We examine the effects of not only the level of these risks but also their changes over time. One of the major findings is that among the political and financial risks, only the political risk is adversely associated with FDI inflows. Specifically, not only the initially low level of political risk, but also a decrease in the level of political risk helps to bring a greater amount of FDI inflows. On the other hand, lower financial risk does not attract FDI inflows, especially to developing countries. Among the various components of political risk, in the sample of developing countries only, it is found that internal conflict, corruption, military in politics, and bureaucracy quality are inversely related to inward FDI flows.     

The effects of foreign aid,foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities

This paper examines the relationship between foreign aid (AID), foreign direct investment (FDI) and domestic investment (DI) and its effects on economic growth in 41 African countries. Annual panel data from 1990 to 2016 are examined using fixed‐effects (FE) and system‐GMM estimators. We test the existence of nonlinearities and complementarities in the relationship between AID–FDI, AID–DI, FDI–DI, and AID–FDI–DI. Empirical results confirm the existence of a nonlinear relationship between AID, FDI, DI, and economic growth. Besides, the results show that AID and FDI have a significant positive complementing effect on economic growth. It is shown also that FDI complements DI, while the coupled effect of AID and DI remains weak in catalyzing growth. Moreover, the results indicate that the complementarity between AID–FDI–DI positively influence economic growth, revealing that AID and FDI work as a complement factor to DI and enhance its effectiveness in promoting economic growth. These insights have important policy implications. Policy‐makers in African countries are well advised to implement concrete policy measures suitable for building on the growth momentum created by foreign capital inflows, like FDI, AID as well as remittance.     

基于资源及经济安全视角的中国对外投资合作研究

在当前世界经济发展中,我国对外经济合作呈现越来越强劲的增长势头,并且大部分的合作项目都同时伴有较大规模的对外投资及自然资源的贸易往来。本文运用引力模型研究了我国的对外经济合作及与其相关的投资流,模型中额外加入了基于资源及经济安全角度考虑的其他因素。研究结果显示,经典引力模型中通常会影响对外投资的各要素同样会作用于我国的对外经济合作,同时合作国的自然资源禀赋亦表现出较强的吸引华资优势,此外,我国在选择合作伙伴国时倾向于较弱的政治自由度,较低的腐败程度及较稳定和持续的经济增长环境。     

Heterogeneous effects of bilateral investment treaties

Bilateral investment treaties (BITs) are an increasingly used policy instrument to encourage FDI inflows, particularly inflows into developing countries. In this paper we estimate a gravity model of FDI flows from a sample of OECD countries to a broader sample of developing economies, examining the impact of BITs on these flows. BITs are signed between highly heterogeneous country-pairs, with important differences found in terms of the institutional and economic distance between BIT signatories. These differences may help explain the mixed results on the effects of BITs on FDI flows in the existing literature, with our exploration of non-linearities in this relationship suggesting that the effects of BITs are increasing in the difference in GDP and GDP per capita between source and host. BITs appear to have no impact upon FDI flows for country-pairs that are too dissimilar in terms of the strength of their political institutions.     

Foreign Capital Flows,Uncertainties of Exchange Rates and Central Bank Independence: Implications for Emerging Economies

Utilizing time series data for a panel of 22 emerging countries and applying Granger causality tests, this paper extends the relationship between central bank independence (CBI) and uncertainties of inflation by including the phenomena of exchange rates and foreign capital flows. There are two specific objectives of this investigation. The first objective is to see whether uncertainty of inflation induces volatility of exchange rates, and vice versa, under differing degrees of CBI. The second objective is to explore whether the dynamics of the former relationship influence foreign capital flows in turn and, if so, whether the extent of CBI plays any role in shaping that influence. The period of study spans the years 1968 through 2013. Conditional variances for inflation and exchange rates define proxies for uncertainties of inflation and exchange rates in the empirical analysis. Additionally, annual inflows of foreign direct investment (FDI) provide measures for foreign capital flows in the analysis. Results of causality tests for high and low CBI country subgroups show interesting differences. For the high CBI countries, uncertainty of inflation and uncertainty of exchange rates do not share any causal relationship whatsoever between them. However, a weak link runs from FDI to uncertainties of inflation in the long run. This may be indicative of the disciplined monetary policy and tamed inflation in these countries. Contrastingly, for the low CBI countries, there is strong evidence of causal links running from uncertainties of inflation to uncertainties of exchange rates on the one hand and to FDI flows on the other. In addition, there is indication of a bi-directional causal link between FDI flows and exchange rates for these countries.     

Political instability, policy uncertainty, and economic growth: An empirical investigation

This paper elaborates upon the effect of political stability on economic growth using a novel approach. Unlike the literature on growth that emphasizes the turnover of decision makers, this paper focuses on the volatility of economic policies as the relevant indicator of stability. The literature on growth ignores the microeconomic instability associated with frequent changes of government policies. The empirical results of this paper indicate that the effect of political instability on economic growth is not conclusive. Most of the commonly used proxies for political instability have failed to explain growth differences across countries. The political instability indices have no significant effect on growth when a reasonable set of core variables is also included in the regression equation. The results also show that almost all of the policy uncertainty variables are significantly and negatively correlated with economic growth. However, the instability of economic policies has no significant impact on the accumulation of capital.     

Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990–2010

We investigate the relationship between economic growth and lagged international capital flows, disaggregated into FDI, portfolio investment, equity investment, and short-term debt. We follow about 100 countries during 1990–2010 when emerging markets became more integrated into the international financial system. We look at the relationship both before and after the global crisis. Our study reveals a complex and mixed picture. The relationship between growth and lagged capital flows depends on the type of flows, economic structure, and global growth patterns. We find a large and robust relationship between FDI – both inflows and outflows – and growth. The relationship between growth and equity flows is smaller and less stable. Finally, the relationship between growth and short-term debt is nil before the crisis, and negative during the crisis.     

Global Foreign Direct Investment Flows: The Role of Governance Infrastructure

It is widely argued that a country’s economic performance over time is determined to a great extent by its political, institutional and legal environment. We refer to these institutions and policies as the governance infrastructure of a country. We utilize newly developed indices to examine the effects of governance infrastructure on both foreign direct investment (FDI) inflows and outflows for a broad sample of developed and developing countries over 1995–97. In addition, we examine the role of other forms of infrastructure including human capital and the environment. The results clearly indicate that governance infrastructure is an important determinant of both FDI inflows and outflows. Investments in governance infrastructure not only attract capital, but also create the conditions under which domestic multinational corporations emerge and invest abroad. It would appear that investments in governance infrastructure are subject to diminishing returns, so that the benefits, in terms of inflows, are most pronounced for smaller and developing economies.     

The Effect of Inflation Targeting on Foreign Direct Investment Flows to Developing Countries

Due to the many benefits that come with foreign direct investment (FDI), such as greater economic growth and technology spillovers, developing countries strive to attract this type of investment. Although the amount of FDI in developing countries has increased greatly over the past several years, not all developing countries have been successful at attracting it. A credible monetary policy, such as inflation targeting (IT), might make countries that implement it more attractive destinations for FDI flows due to the reliable macroeconomic environment created. This paper estimates the effect of IT on FDI flows to developing countries using a difference-in-differences approach and panel data for 71 countries for the period 1985 to 2013. This paper also looks at the difference between targeting and non-targeting countries in terms of FDI inflows during times of high instability. The results indicate that the adoption of IT leads to increased FDI flows to developing countries overall and, most importantly, during times of distress.

     

Does Foreign Direct Investment Provide Desirable Development Finance？ The Case of China

Foreign direct investment (FDI) is often considered as a cost-effective and risk-reducing source for development finance. This paper,however,shows that FDI finance often entails underestimated risks and costs. FDI might react sensitively to business cycles and might not be as "permanent" as conventionally believed. FDI might also accelerate other forms of capital flow in times of financial difficulties and,hence,destabilize financial order. In addition to the risks,compensations to FDI and the high import-dependency of FDI-related trade lead to a considerable drain on the balance of payments. Moreover,the reliance on foreign capital for development finance is equivalent to building a Ponzi financing scheme and,therefore,is unsustainable. Given the fact that FDI financing is risky and costly and China does not lack savings,it is suggested in the present paper that China's efforts in attracting FDI should not aim at external capital provisioning.     

Business start-up regulations and the complementarity between foreign and domestic investment

This paper shows that the complementarity between foreign direct investment (FDI) and domestic investment significantly depends on regulations required to start a new domestically owned business in host economies. It finds evidence that FDI crowds out domestic investment in countries with entry regulation cost above a certain level, and many of these countries are in the bottom quartile of GDP per capita. Reforms in business start-up regulations can therefore play a critical role in enhancing the complementarity between foreign and domestic investment and thereby increase entrepreneurship and economic growth in low-income countries. The analysis takes into account other significant factors which affect domestic investment such as the cost of capital, government’s economic growth track record, institutional quality, and market size.     

Fiscal risks and their impact on banks' capital buffers in South Africa

South Africa's fiscal balances have deteriorated significantly over the last decade, although the economy has been recording disappointing economic growth rates even prior to the COVID-19 crisis. In this paper, we estimate a series of equations to test how sovereign risk premia affect capital buffers, while controlling for variables identified in the literature, such as size of banks and the economic cycle. Unlike other studies, we use actual capital buffers. We show that these are substantively different to the proxy buffers calculated using the common approach in the literature, indicating that results based on proxy measures should be interpreted with caution. Our overall results show a positive relationship between the sovereign risk premium and capital buffers. This suggests that banks are accumulating capital to mitigate against fiscal and other domestic policy risks. It is likely that this is contributing to higher lending rates.     

Political instability and economic development in Sub-Saharan Africa: Some recent evidence

Political instability has become endemic to Sub-Saharan Africa. Since the early 1960s, when most of the African countries began to achieve independence, more than fifty coups have taken place in the continent. This rise in political decay has significantly affected economic development. This study examines the relationship between elite political instability and economic development in Sub-Saharan Africa. It concludes that lack of political stability has contributed significantly to economic stagnation in the continent of Africa.     

Political instability, investment and economic growth in Sub-Saharan Africa

This paper explores the relationship between political instabilityand economic growth in Sub-Saharan African nations. A more comprehensivemeasure of political instability than has previously been developedis used in combination with a simultaneous equations model anddynamic panel estimation approach to produce several interestinginferences. First, the statistically significant inverse relationshipbetween political instability and economic growth identifiedby earlier studies is confirmed by the estimates presented here.Second, the estimated system of equations indicates that economicgrowth and political instability are jointly endogenous. Third,in addition to the direct impact that political instabilityhas upon growth, estimates confirm the hypothesis that politicalinstability indirectly decreases economic growth by decreasinglong-run capital accumulation. Fourth, failure to account forthe dynamic nature of growth equations as well as the endogeneityof explanatory variables may produce biased effects of politicalinstability on growth. Fifth, the broad measure of politicalinstability we use in this study can better capture the effectsof political instability on economic growth than 'elite' instabilitythat has been used by earlier researchers. Finally, principalcomponents estimation is used to develop a measure of politicalinstability that can serve as an alternative to the arbitraryweighting scheme used in previous research.     

FDI与中国经济增长:1998-2003年的实证检验

文章通过对我国1998-2003年FDI与经济增长的协整分析和Granger因果关系检验,得出结论:FDI与中国经济增长之间存在稳定的正向均衡效应以及单向因果关系,FDI的增长是GDP增长的Granger原因,但由于利用FDI过程中存在外资利用结构引发的对国内投资的挤出以及国内储蓄的低效利用,削     

FDI、经济增长与工业污染——基于安徽省1993—2012年数据的EKC检验

基于协整理论、格兰杰因果检验和EKC假说,考察了安徽省利用FDI发展经济背后的环境风险。研究结果显示：FDI和工业废气、工业固体废物均存在协整和因果关系,但无论在长期还是短期,FDI对工业废水排放的影响都不明显,这很大程度上取决于FDI在安徽省的行业分布状况。此外,样本期间安徽省不存在严格的“倒U”型EKC,工业废气和工业固体废物仍随着经济增长而不断增加,工业废水减排的管制效果明显,其与经济增长的关系呈“U＋倒U”型,而外资的流入则进一步加大了安徽省跨越EKC顶点的难度。     

Democracy and growth: The Sub-Saharan African case, 1960–1992

This article conducts a cross-national analysis of forty sub-Saharan African countries during the years 1960–1992. It examines the longrun relationship between political democracy and economic growth, taking advantage of the availability of large economic and political data sets. The conclusion from this study is that the economy grows faster under a regime that enjoys a higher level of institutionalized democracy. It is also found that a positive feedback relationship exists between democracy and growth; while democracy promotes growth, growth leads to a higher level of democratization. In addition, it is found that the duration of authoritarian rule decreases economic growth, while growth shortens the tenure of an autocratic government. Other factors that account for growth in sub-Saharan African countries include the initial size of the economy, human capital stocks, domestic investment share, and international trade.     

Patents,foreign direct investment and economic growth in Australia, 1860–2010

We examine the long run relationship between innovation and economic development in Australia, using 150 years of data on patenting activity, and aggregate and sectoral economic indicators. Our initial results point to several important causal relationships, particularly the effects of patents on real GDP and of private capital formation on patents. We delve deeper at the sector level and find important causal relationships of patents with real foreign direct investment (FDI) since World War II. Australia's dependence on FDI for private capital formation served as an important stimulus for knowledge creation in key sectors including manufacturing, agriculture and mining.     

China's economic development: does exchange rate and FDI nexus matter?

This study aims to investigate the relationship between China's exchange rate, foreign direct investment (FDI) inflows, and economic development. We applied the bound testing approach on aggregate level data from 1981 to 2013. The results showed that the Chinese economy benefitted from a lower exchange rate over this period, and that there was a direct link between FDI inflows and economic development on an aggregate level both in the long and short run. The results of the Granger causality test identified a long‐ and short‐run association among these variables. The GMM estimations with dummies for financial crises and RMB exchange rate policy fluctuations also confirmed the growth enhancing impact of the exchange rate and FDI inflows. To promote sustainable economic development in the future, China should focus on improving the levels of domestic investment and human capital, as well as supervising the level of openness and capital controls.     

基于VAR模型的贵州省FDI与经济增长的相互关系研究

将各年外商直接投资额按当年加权平均汇率折算为以亿元人民币为单位,运用VAR模型、脉冲响应函数及方差分解对贵州省FDI与经济增长的相互关系进行了实证研究。结果显示:贵州省FDI与经济增长之间存在一定的相互促进关系。由于FDI规模较小、行业分布不尽合理,导致FDI对贵州省经济增长的促进作用明显弱于经济增长对FDI的促进,且作用时滞相对较长。贵州省在加快发展经济的同时,应合理引导外资投向,优化FDI的行业分布,全面提升FDI的利用效率。