Structural change and foreign direct investment: globalization and regional economic integration

This paper investigates flows of inward and outward foreign direct investment (FDI) and FDI-to-GDP ratios in a sample of 62 countries over a 30 year time span. Using several endogenous structural break procedures (allowing for one and two break points), we find that: (1) the great majority of the series have structural breaks in the last 15 years, (2) post-break FDI and FDI/GDP ratios are substantially higher than the pre-break values, and (3) most breaks seem to be related to globalization, regional economic integration, economic growth, or political instability. Static and dynamic panel-data analyses accounting for and/or addressing endogeneity, simultaneity, nonstationarity, heterogeneity and cross-sectional dependence show that FDI is negatively related to exchange rate volatility and GDP per capita, but positively related to some regional integration agreements, trade openness, GDP, and GDP growth. Most notably, the European Union is the only regional economic integration unit found to consistently have significant and positive effects on FDI.     

Foreign direct investment and growth in India: a cointegration approach

The two-way link between foreign direct investment and growth for India is explored using a structural cointegration model with vector error correction mechanism. The existence of two cointegrating vectors between GDP, FDI, the unit labour cost and the share of import duty in tax revenue is found, which captures the long run relationship between FDI and GDP. A parsimonious vector error correction model (VECM) is then estimated to find the short run dynamics of FDI and growth. Our VECM model reveals three important features: (a) GDP in India is not Granger caused by FDI; the causality runs more from GDP to FDI; (b) trade liberalization policy of the Indian government had some positive short run impact on the FDI flow; and (c) FDI tends to lower the unit labour cost suggesting that FDI in India is labour displacing.     

Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

This paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector-specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary and tertiary and examine their individual impact on growth, as well as their sector-specific spillovers by using dynamic panel GMM methodology. We find prima facie evidence that total FDI significantly stimulates growth. However, when we turn to the disaggregated FDI data, primary sector FDI adversely affects the gross domestic product (GDP) growth in the service sector and overall GDP growth. On the other hand, secondary FDI has a ‘double-edged’ effect, benefiting its own sector (the service sector's GDP growth), but not other sectors. In contrast, service sector FDI stimulates GDP growth in mining, manufacturing and service sectors, thereby enhancing overall economic growth. Our findings have important policy implications regarding the incentives provided by governments to encourage FDI, which need to be fine-tuned to attract certain types of FDI (tertiary), with less focus on the primary sector     

FDI对我国创业型经济发展的效应分析

运用面板门限模型验证了FDI对我国创业型经济影响的门限特征。结果显示,在全国范围内,区域人均GDP发展水平的变化会使FDI对创业型经济的影响表现出门限特性,即当区域人均GDP低于FDI发挥积极作用的门限时,FDI将会对创业型经济产生负面影响;而当区域人均GDP超过该门限后,FDI对创业型经济的发展将发挥越来越大的促进作用。     

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

This paper assesses the impact of institutional factors on foreign direct investment (FDI) attractiveness using a pool of 25 emerging host countries (ECs) for the period 1996–2012. In particular, the paper aims to examine whether higher institutional quality and good governance do improve FDI attractiveness, and thereby to identify which institutional factors are the main drivers of FDI in ECs. Using a static and dynamic panel gravity model with various estimation techniques, we find that FDI is positively and significantly influenced by political stability, government effectiveness and regulatory quality. The remaining set of governance indicators is found to be statistically significant and negatively linked to FDI. Our findings also show that factors like a larger GDP per capita difference between investing partner and ECs, higher degree of trade openness and better infrastructure have positive and significant effects on FDI attractiveness. These results have important policy implications for ECs. Fostering FDI inflows into these countries requires policymakers to improve the quality of their institutions and business climate through implementing sound economic policies and regulations.     

Political Institutions, Capital Flows, and Developing Country Growth: An Empirical Investigation

The paper examines the real per-capita growth effects of the quality of democracy, the rule of law, and capital flows in developing countries. The direct growth effects of democracy are positive and often statistically significant. Moreover, the estimates from a three-stage least-squares regression offer evidence that democracy has indirect growth effects that work by encouraging schooling and that the rule of law influences growth indirectly by encouraging foreign direct investment. A higher FDI to GDP ratio is associated with a faster growth rate. The estimated growth effect of the FDI to GDP ratio is several times higher than the estimated growth effect of the domestic investment to GDP ratio. By contrast, this study does not find a clear asso-ciation between other types of capital flows and growth.     

FDI、对外贸易对区域经济增长的影响——以湖南省为例

本文利用湖南省1985～2006年经济数据,根据协整理论和VAR模型等方法,从不同角度研究了FDI、对外贸易和经济增长之间的动态关系。实证结果表明,FDI、对外贸易与经济增长间具有长期均衡关系,且湖南省地区生产总值的增长与FDI和进口额都有双向因果关系;经济增长对进出口的波动冲击都表现出正向响应,而FDI由于地区因素的影响,作用较小。     

Autocracy,Democracy, and FDI Inflows to the Developing Countries

Abstract

This paper investigates the relationship between political regimes and Foreign Direct Investment (FDI) inflows to the developing countries for a sample of 134 countries over the 1983–2002 period. Using two categorical measures of regime type and three different measures of FDI, this study finds that, regardless of the measures of regime type, democracies are not significantly associated with either FDI in level or FDI as a ratio to GDP; democracy is positively related to a higher level of per capita FDI, but this result is not robust to alternative measures of political regime. Taken as a whole, there is no evidence of a systematic relationship between democracy and FDI inflows. This result suggests that being a democracy does not help attract higher levels of FDI.     

外商直接投资对武汉区域经济的影响分析

以中国中部省会城市武汉市为例,对外商直接投资的投向产业、投资方式与国内生产总值的关系进行了研究。研究结果表明武汉市的外商直接投资与国内生产总值之间存在显著的正相关关系,并且外商直接投资是国内生产总值的葛兰杰原因。特别是投向第二产业和第三产业的外商直接投资和采用外资企业形式的外商直接投资对国内生产总值增长有显著正影响。     

Level and dynamics of financial depth: consequences for volatility of GDP

The existing literature documents positive but potentially non-linear relationship between financial depth measured as private credit to GDP ratio and volatility of GDP. In this paper, we extend the analysis by considering also the role of financial depth dynamics. We use dynamic spatial panel models to address the issue of cross-sectional dependence of errors obtained from the standard dynamic panel models. We confirm the non-linear impact of the financial depth level but also find that higher growth rates of financial depth are significantly associated with higher volatility of output. The role of the latter factor is considerably more important in terms of explained variance compared to the impact of the private credit level. These results are robust to changes in the sample range, specification of the model, and measurement of the key variables. We also document considerable differences between the estimates obtained from the standard GMM and the spatial models.     

Economic growth and carbon emissions: evidence from CIVETS countries

ABSTRACT

This paper examines whether a long-run relationship exists between CO₂ emissions and selected variables: real gross domestic product per capita, inward stock of foreign direct investments, gross fixed capital formation, industry, value added and energy use per capita for Colombia, Indonesia, Viet Nam, Egypt, Turkey and South Africa countries in the period of 1989–2016. We used panel unit root testing, followed by panel cointegration tests and panel causality. The results clearly prove the existence of a bidirectional long-run causal relationship between all the variables except between CO₂ emissions and GDP and CO₂ emissions and GFCF. Major finding of the short-run causality analysis is that CO₂ emission in the short run does not result in changes of other variables. On the other hand, all variables except foreign direct investments (FDI) cause the changes in the CO₂ emissions, and there is a positive bidirectional causal relationship between GDP and FDI, between GFCF and FDI, and between GFCF and IVA. Finally, positive unidirectional causal relationship also exists, running from GDP to IVA, GDP to ENUSE, IVA to FDI and ENUSE to FDI.     

Economic growth,exports and foreign direct investment in Least Developed Countries: A panel Granger causality analysis

This paper investigates potential Granger causality among the real GDP, real exports and inward FDI in Least Developed Countries for the period between 1970 and 2009. A new panel-data approach developed in Kónya (2006) [Kónya (2006), Exports and growth: Granger causality analysis on OECD countries with a panel data approach, Economic Modelling, 23, 978–992] which is based on SUR systems and Wald tests with country specific bootstrap critical values has been employed. The results indicate direct, one-period-ahead, unidirectional causality from exports to GDP in Haiti, Rwanda and Sierra Leone, and from GDP to exports in Angola, Chad and Zambia. Considering the FDI–Growth nexus, there is evidence of FDI Granger-causing GDP in Benin and Togo, and GDP Granger-causing FDI in Burkina Faso, Gambia, Madagascar and Malawi. While studying EXP–FDI relations, this paper finds that the causality is from FDI to real exports in Benin, Chad, Haiti, Mauritania, Niger, Togo and Yemen, and from real exports to FDI in Haiti, Madagascar, Mauritania, Malawi, Rwanda, Senegal and Zambia.     

Foreign Direct Investment,Financial Development and Their Impact on the GDP Growth in Low-income Countries

ABSTRACT

This essay empirically studies the effects and causal links between foreign direct investment (FDI), financial development (FD) and economic growth. The sample consists of the main economies of low-income countries and the study covers the period 1990–2015. The results of the estimate show that, under certain specific economic conditions, FDI affects positively the level of long-term economic growth; it thus makes it possible to improve the economic situation of these countries. Using Johansen’s cointegration technique, the results find that FD; FDI and GDP growth are cointegrated, that shows the pursuit of the long-term equilibrium relationship between them. The error correction model confirms the existence of a double causal relationship between FDI and GDP growth, and between FD and FDI and between GDP growth and FD.     

Revisiting the FDI-led growth Hypothesis: The case of China

We employ simulation based inference to investigate the causal relationship between foreign direct investment and gross domestic product in China for the 1982–2008 period, both in a bivariate and a multivariate framework. Our maximum entropy bootstrap based approach, which avoids pre-test biases while also being less affected from the size distortion problem, shows that a statistically significant relationship between FDI and GDP growth does not exist. We also explore whether this result is driven by the level of financial development and we find that there is no evidence of a change in the noncausal relationship due to this contingency effect. Our results indicate that FDI does not necessarily lead to higher economic growth at the aggregate level and suggest the need for undertaking disaggregated analyses using industrial and provincial level data for the formulation of effective macroeconomic policies concerning the flows of FDI.     

Home country effects of foreign direct investment: From a small economy to a large economy

Previous studies on home country effects mainly focused on FDI from large developed economies to other countries. But today's super recipient is a relatively larger economy than its investors and many of these investors are not classified as “developed economies.” A simple Ak type model implies that a small and more developed country investing in a large and less developed country will experience decreases in both employment and income disparity (compared to the recipient country) as the less-developed recipient country gains the higher technology of production through FDI inflows. The empirical results for the Four Tigers (source countries) and China (recipient country) are consistent with our theoretical model of FDI outflows. We also find that FDI outflows to China decrease the ratio of exports to GDP only for small source countries, even though a higher investment in China raises the share of these countries' exports-to-China to China's total imports.     

Foreign Direct Investment, inequality, and growth

This paper examines the interactions between Foreign Direct Investment (FDI), inequality, and growth, both from an empirical and a theoretical point of view. Using a panel of 119 developing countries, we observe that FDI promotes both inequality and growth, and tends to reduce the share of agriculture to GDP in the recipient country. We then set up a growth model of a dual economy in which the traditional (agricultural) sector uses a diminishing returns technology, while FDI is the engine of growth in the modern (industrial) sector. The main predictions of the model are consistent with the stylized facts observed in the data.     

外商直接投资与天津出口贸易的互动关系——基于脉冲响应函数法的实证分析

本文利用天津1980-2007年的年度统计数据,运用协整分析和格兰杰因果检验方法分析了出口贸易与外商直接投资之间的关系,并利用广义脉冲响应函数和方差分解法进一步分析了两者间的动态关系。研究结果表明,天津的出口贸易与外商直接投资、贸易伙伴国的经济增长和进口贸易之间存在长期稳定的均衡关系,外商直接投资、贸易伙伴国的经济增长和进口贸易都是出口贸易变动的原因。从动态角度看,在短期内,天津出口贸易对外商直接投资冲击的反应短期较为明显,而贸易伙伴国经济增长与进口贸易对出口贸易的影响在短期并不显著;从长期来看,FDI对出口贸易具有明显的替代效应,出口贸易增长主要依赖于进口贸易,而贸易伙伴国经济增长对出口贸易的影响作用十分有限。     

China’s Outward FDI: An Industry-Level Analysis of Host-Country Determinants

We use disaggregated data by country and industry to empirically analyze the host country determinants of Chinese outward foreign direct investment (FDI) for the years 2003 to 2011. Our results suggest that the host-country determinants of Chinese FDI differ between high- and low-income countries. While all Chinese FDI is invariably market seeking, other motivations stand out for differing sectors in specific country groups. The resource seeking motivation is relevant for manufacturing FDI to high-income countries with relatively high fuel abundance, and to low-income countries with primary resource abundance (other than fuels). Differently, the strategic-asset seeking motivation, measured by the level of R&D spending on GDP, only positively and significantly affects Chinese manufacturing and service FDI to OECD countries, while higher education levels are an attraction factor for all investing firms. Natural resource is an important attraction factor for Chinese FDI, not only in resource-related sectors, but also in manufacturing and service sectors. Finally, Chinese FDI tends to follow exports (rather than foster them), especially in service sectors.     

江浙沪地区FDI与城市化关系初探——基于2009年横截面数据的分析

2009年江浙沪地区城市化率与FDI、人均GDP、第三产业比重等变量的横截面数据,显示了外商直接投资与城市化的运行轨迹。据此对FDI和其他因素与城市化的关系作了线性回归分析,并实际测算了FDI对该区域城市化的贡献。结果表明,外商直接投资对江浙沪地区城市化的贡献是显著的,但其显著程度不及第三产业比重和人均GDP对城市化的影响。     

FDI对GDP增长的影响评价——基于山东省产业的实证研究

关于FDI对中国经济发展的贡献,引起了很大的关注。以山东省为考察对象,选用科学的模型和变量,定量分析FDI对不同产业GDP增长的贡献。分析结果证明,山东省利用FDI在不同产业取得了不同的效果,基于这一点,最后提出了今后在不同产业利用FDI的对策建议。