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1 – 10 of over 49000Gildas Dohba Dinga, Dobdinga Cletus Fonchamnyo, Nkoa Bruno Emmanuel Ongo and Festus Victor Bekun
The study examined the impact of financial development, foreign direct investment, market size and trade openness on domestic investment for 119 countries divided into four panels…
Abstract
Purpose
The study examined the impact of financial development, foreign direct investment, market size and trade openness on domestic investment for 119 countries divided into four panels that are low-income countries (LIC), lower middle-income countries (LMIC), upper middle-income countries (UMIC) and high-income countries (HIC) between 1995 and 2019.
Design/methodology/approach
The present study bases its empirical procedure on the bases of the data mix. To this end, based on the presence of cross-sectional dependence, covariate-augmented Dickey–Fuller unit root and Westerlund cointegration second-generation tests were employed to validate the stationarity and cointegration of the variables, respectively. The novel Dynamic Common Correlation Effects estimator was employed to estimate the heterogeneous parameters while the Dumitrescu and Hurlin test was used to test for causality direction of the highlighted variables.
Findings
The empirical results show that market size and trade openness had a positive and statistically significant effect on domestic investment for all the income groups. Results also show that financial development had a positive and statically significant effect on domestic investment only for LMIC and HIC economies, while a positive and statistically insignificant effect was obtained for LIC, UMIC and the global panel. The causality results revealed a bidirectional relationship between domestic investment and the exogenous variables – financial development, foreign direct investment, market size and trade openness.
Research limitations/implications
It is therefore, recommended that LIC and LMIC need to consider harmonising the financial system to lower credit limitations and adopt business-friendly policies. HIC and UMIC should seek more outward FDI policies and harmonise their trade policy, to reap more benefits from FDI and international trade.
Originality/value
On novelty, previous studies have been criticised for the effect on technical innovation of bank financing and institutional quality. This research tackles the deficiency using systematic institutional quality indicators and by taking other variables into account.
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Oyakhilome Ibhagui and Kolawole Olawole
In the past few decades, there have been phenomenal increases in capital flows to developing and emerging markets. However, a key question that has largely remained unanswered is…
Abstract
Purpose
In the past few decades, there have been phenomenal increases in capital flows to developing and emerging markets. However, a key question that has largely remained unanswered is whether the expected economic benefits have materialized. Existing studies have concentrated on the impact of capital flows on domestic investment in developing countries, emerging markets, transition economies, ECOWAS and sub-Saharan Africa, leaving an important economic bloc, OPEC. This paper aims to assess the impact of capital flows on domestic investment in OPEC countries – with a view to determining whether capital flows crowd in or crowd out domestic investment.
Design/methodology/approach
For the empirical analysis, the authors used the autoregressive distributed lag (ARDL) technique.
Findings
The empirical results provide evidence that capital flows crowd out domestic investment in all the OPEC countries considered, except for Angola and Kuwait. The authors further extended the analysis to disaggregated capital flows (FDI, portfolio investment). Evidence from the different capital flows components revealed that, for most countries, the different capital flows components also crowd out domestic investment.
Originality/value
To the best of the author’s knowledge, no study has empirically addressed the effect of capital flows on domestic investment in OPEC countries. This study, therefore, constitutes an interesting empirical contribution and a novel idea in the literature.
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Justice Gameli Djokoto, Francis Yao Srofenyoh and Kobla Gidiglo
– The purpose of this paper is to investigate the effects of foreign direct investment (FDI) into agriculture on domestic investment in agriculture.
Abstract
Purpose
The purpose of this paper is to investigate the effects of foreign direct investment (FDI) into agriculture on domestic investment in agriculture.
Design/methodology/approach
Time series data from 1976 to 2007 was fitted to a derived model.
Findings
Foreign direct investment into agriculture crowd-in domestic investment into agriculture.
Research limitations/implications
A targeted approach that will attract foreign direct investment into agriculture is required as to complement existing efforts at boosting domestic agricultural investment.
Originality/value
Numerous papers investigated the relationship between foreign direct investment and domestic investment at the aggregate national and regional levels. However, the evidence for this relationship has been conflicting. That for agriculture is rare. For Ghana, a developing agrarian economy that has promoted foreign direct investment for some decades now, it is imperative to establish the relationship between foreign direct investments and domestic investment. Also, the estimation was based on a theoretically derived model.
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Pengfei Ge, Xiaoxu Wu, Bole Zhou and Xianfeng Han
This study aims to determine how and through what mechanisms the outward foreign direct investment (OFDI) promotion effect of the Belt and Road initiative (BRI-OFDI) affects…
Abstract
Purpose
This study aims to determine how and through what mechanisms the outward foreign direct investment (OFDI) promotion effect of the Belt and Road initiative (BRI-OFDI) affects domestic investment. It is motivated by the context that China is fostering a new development pattern, as well as by the impetus from the Belt and Road initiative for the new pattern.
Design/methodology/approach
Drawing on data of Chinese-listed companies, this study uses a difference-in-difference method to explore the effect of the BRI-OFDI on domestic investment and a mediation model to illustrate the mechanisms.
Findings
The BRI-OFDI has a significantly positive effect on domestic investment, meaning that the Belt and Road initiative's OFDI promotion effect crowds in domestic investment. The results are heterogeneous: the crowding-in effect mainly exists in non-state-owned and technology-intensive enterprises, while a crowding-out effect is seen in state-owned and labor-intensive enterprises. The easing of corporate financing constraints and the expansion of market demand are two important mechanisms.
Originality/value
This study uses the Belt and Road initiative as an exogenous shock to investigate the impact of the initiative-induced OFDI promotion effect on domestic investment. It addresses the potential endogeneity issue confronting the studies on the relationship between OFDI and domestic investment in the literature. The authors focus on the possible spillover effects of the Belt and Road initiative discussing the impact of the BRI-OFDI on domestic investment from the micro-firm perspective. It offers a new perspective to objectively assess the initiative's policy effect.
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David Deok‐Ki Kim and Jung‐Soo Seo
This paper provides empirical evidence on the dynamic relationship between inward foreign direct investment (FDI), economic growth and domestic investment in Korea for the period…
Abstract
This paper provides empirical evidence on the dynamic relationship between inward foreign direct investment (FDI), economic growth and domestic investment in Korea for the period 1985‐1999. By employing a vector autoregression model and the innovations accounting techniques, we explore dynamic interactions between inward FDI, domestic investment and output. We find that FDI has some positive effects on economic growth, but its effects seem to be insignificant. On the other hand, economic growth is found to have statistically significant and highly persistent effects on the future level of FDI. Although FDI is exogenous contemporaneously, we find that FDI shows strong dynamic endogeneity to domestic macroeconomic conditions, which has not been uncovered in previous works. Our finding does not support the view that FDI crowds out domestic investment in Korea.
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Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some…
Abstract
Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.
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Niharika Sinha and Swati Shastri
This paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.
Abstract
Purpose
This paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.
Design/methodology/approach
This study employs the autoregressive distributed lag (ARDL) bounds testing approach to co-integration to test the long-run relationship between financial development and domestic investment. To test the direction of causality, Toda–Yamamoto causality test and vector error correction model (VECM) Granger causality/Block Exogeneity Wald test have been employed. Investment has been measured by Gross Capital Formation. To capture various aspects of financial development in India, eight alternative indicators (both bank based and market based) have been used. With the help selected indicators, a composite index (FINDEX) of financial development has been constructed using principal component analysis (PCA).
Findings
The estimated result finds evidence in favour of positive, short-run and long-run impact of financial development on investment in the Indian economy. Both bank-based and market-based indicators are found to significantly affect the level of investment. The significant effect of efficiency-based financial development indicators (both bank based and market based) upon domestic investment implies that there is a need to implement policies that ensure the efficiency of financial intermediation.
Originality/value
To the best of authors' knowledge, not much research has been done to explore the relationship between financial development and domestic investment, especially in the case of Indian economy. This study also tries to find the impact of bank-based and market-based financial development indicators upon domestic investment to explore banks vs market issue.
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Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of restrictions. A key…
Abstract
Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms. The survey focuses mainly on work related to developing countries.
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The paper uses 101 years of Chilean and international financial assets returns to investigate mean-variance optimal portfolio allocations. The key conclusion is that the share of…
Abstract
The paper uses 101 years of Chilean and international financial assets returns to investigate mean-variance optimal portfolio allocations. The key conclusion is that the share of international unhedged investments is substantial even in minimum risk portfolios (20%), unless the period 1980–2002 is assumed to be drawn from a different distribution and previous history is disregarded. In addition to that, the paper finds that mean-variance optimal investors would have generated substantial demand for an asset replicating the return profile of an efficient pay-as-you-go pension scheme. Labour income and departures from log-normality of returns might, however, affect the latter conclusion.
The paper underpins an advanced domestic manufacturing that comes with some advanced employment specialization status of individual industries as the key determinant of foreign…
Abstract
Purpose
The paper underpins an advanced domestic manufacturing that comes with some advanced employment specialization status of individual industries as the key determinant of foreign direct investment (FDI) and considers how FDI in the food processing industry in India relates to this focal point.
Design/methodology/approach
This paper investigates how inward FDI inflows relate to domestic investment and revival in the industry using Auto Regressive Distributed lags (ARDL) model over the period 2000–2017. The model allows for different specifications to study whether FDI is responsible for the revival or the prior revival induces the FDI.
Findings
The results show the lack of proper advanced specialized employment status of the food processing industry. FDI in food processing is mainly guided by exports and imports opportunities and FDI plays no role in the revival of advanced growth in the industry. This finding explains why FDI in the industry is predominantly service sector oriented.
Originality/value
The paper underlines (1) the proper conceptualization of human capital as an important determinant of FDI; (2) reinterpretation of Kaldor's technical progress function that uncovers how employment dynamics embedded in intermediate goods specializations play a key role in supporting a higher pace of investment (and FDI); (3) labor costs' importance should involve not only the wage rate but also the advantages that a specialized employment base and (4) FDI in manufacturing demands a greater policy focus on developing domestic bases of intermediate goods specializations.
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