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This paper aims to investigate the causal nexus between foreign direct investment (FDI) and economic growth in SAARC countries.

Johansen's cointegration test was employed to examine the long‐run relationship between foreign direct investment and economic growth in SAARC countries. Besides, the vector error correction model (VECM) was employed to examine the causal nexus between foreign direct investment and economic growth in SAARC countries for the years 1970‐2007. Finally, the impulse response function (IRF) has been employed to investigate the time paths of log of foreign direct investment (LFDI) in response to one‐unit shock to the log of gross domestic product (LGDP) and vice versa.

The Johansen cointegration result establishes a long‐run relationship between foreign direct investment and gross domestic product (GDP) for the sample of SAARC nations, namely, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The empirical results of the vector error correction model exhibit a long‐run bidirectional causal link between GDP and FDI for the selected SAARC nations except India. The test results show that there is a one‐way long‐run causal link from GDP to FDI for India.

This paper employed annual data to examine the causal nexus between FDI and economic growth. Therefore, researchers are encouraged to test the FDI‐growth relationship further by using quarterly data.

The SAARC nations should adopt effective policy measures that would substantially enlarge and diversify their economic base, improve local skills and build up a stock of human capital recourses capabilities, enhance economic stability and liberalise their market in order to attract as well as benefit from long‐term FDI inflows.

This paper would be immensely helpful to the policy makers of SAARC countries to plan their FDI policies in a way that would enhance growth and development of their respective economies.

This study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between the periods 1995 and 2017.

The study used a secondary source of data obtained from the world development indicator (WDI) and used the system generalized method of moments (SGMM) and dynamic panel threshold regression to analyze the data.

The study found that foreign direct investment has a negative and significant impact on the economic growth of SSA. The study also found that portfolio investment has a positive impact on economic growth but it is statistically insignificant. However, when portfolio investment interacted with financial development, it became positive and statistically significant presupposing that financial development is a necessary condition for portfolio investment to exert impact on economic growth. Further, the study showed that the interaction of foreign direct investment with financial development has a negative and significant effect on economic growth. Finally, the study found the minimum threshold of financial development at 42.66 per cent.

Policymakers in SSA should be cautious and critical in the kind of foreign direct investment they attract as the open door policy to attract all kinds of foreign direct investment would not bring about the desired result. Also, policymakers in the region should develop and implement policies that would deepen and strengthen the financial system to foster the development of the country’s financial sector and accelerate economic growth.

The contribution of the study lies in establishing a minimum threshold of financial development; thus, providing a clear-cut direction for policymakers in SSA countries in their pursuit of financial development and economic growth.

The purpose of this study is to examine the link between country-level corporate governance and foreign direct investment in African economies for the period 2009-2015.

The authors use annual panel data of 40 African economies over the period of the study and use the system generalized method of moments (GMM) to establish the relationship between country-level corporate governance and foreign direct investment.

The authors find that African economies characterized by firms with high ethical values tend to attract a great deal of foreign direct investment. In addition, they highlight that when an economy is associated with effective corporate boards, it tends to attract much foreign direct investment. Further, this study reveals that the level of minority shareholders’ interests’ protection in an economy has a significant positive relationship with foreign direct investment. Finally, they document a negative relationship between effectiveness of regulation of securities and exchanges and foreign direct investment.

It is advised that sound and implementable corporate governance structures devoid of political interferences should be put in place in African economies, if the aim of using foreign direct investment to mitigate poverty by 2015 as part of the Millennium Development Goals is to be attained.

Empiricists have devoted considerable effort to estimate the factors that influence the level of foreign direct investment into African economies without taking into consideration the corporate governance structures in these economies. However, this paper seeks to examine the relationship between country-level corporate governance structures and foreign direct investment in African economies.

The purpose of this paper is to examine the role external debt and foreign direct investment play in influencing financial development in Africa.

Annual data on external debt, foreign direct investment and financial development were extracted from the World Bank World Development Indicators from 2002 to 2015. The data employed were analysed within causal research design and the dynamic panel using generalized method of moment estimation approach.

The findings revealed that external debt and foreign direct investment have a significant positive relationship with financial development in African economies. Governments of the sampled economies should enact policies that would help attract high level of foreign direct investment as it contributes positively to financial development. Finally, governments of the sampled African economies should ensure foreign direct investment and external funds borrowed are channelled to productive sectors.

The paper analysed the relationship between external debt, FDI inflows and financial sector development. The paper is the first in terms of such analysis within the framework of the dual-gap framework, which is the first time in these kinds of studies. Previous studies have concentrated on the effect of financial sector on FDI and not the other way around.

Apart from providing theoretical clarity, the present research aims to validate empirically that the EPU will be adversely affecting these key macroeconomic variables and that managing EPU matters for economic policymaking in Nigeria.

A dynamic autoregressive distributed lag regression model is employed to analyse the relationship from 1990 to 2020. Based on the theory of multiplier effect, the analysis could examine the positive and negative changes in policy uncertainty, as well as the reliability in macroeconomic activities such as unemployment, infrastructure development and foreign direct investment inflows.

The findings revealed EPU is cointegrated with the key economic variables in focus. Further, the negative impact of EPU on corporate investment in FDI and positive impact of EPU on unemployment confirm for both short and long-run. However, the impact of EPU on government investment in infrastructure development is found to be positive which does not confirm the expected hypothesis.

Dynamic relationship between policy uncertainty and macroeconomic activities in Nigeria seems to exist. Taking risky decisions has impact and causing a high unemployment rate, poor infrastructural development and lower foreign direct investment inflows in the country.

Policy uncertainty in Nigeria is determining. Despite that, very little research found that rising uncertainty issues may significantly affect unemployment, investment in infrastructure and foreign direct investment inflows adversely. Therefore, policy uncertainty is an open space for economic activities to thrive in Nigeria, especially unemployment.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2022-0555

The purpose of this paper is to investigate and compare the impact of FDI inflows on bank loans in aggregate as well as at the level of conventional and Islamic banks in GCC countries. The paper also tests hypotheses of direct and indirect impacts of FDI inflow and FDI stock on bank loans.

The sample comprises a total of 70 banks (45 conventional and 25 Islamic banks). The period under consideration is 1995–2017. Static panel and dynamic panel GMM estimation techniques are applied.

Empirical results indicate that inflowing FDI and FDI stock have a significant negative direct impact on loans of GCC banks. The results lend support to the direct channel hypothesis for the effect of FDI on bank loans and find no evidence in support of the indirect channel hypothesis. FDI inflows affect bank loans directly via increased FDI-related liquidity, business activity or excessive competition in the banking market; they are not channeled through macro variables. Loans from conventional banks appear to be more affected than those from Islamic banks.

Given the attractiveness of the GCC economies to foreign investment, the potential volatility of investment-induced instability to the financial system in these economies should be on the radar of the central banks. Attracting more FDI is expected to increase overall national productivity through competition. However, government would be wise to enact a policy to maximize benefits and minimize potential harm to local industry. In addition, to achieve the goal of the new economic model, in turning the GCC economies into high-income and knowledge-driven economies by 2030, enhancement of efficiency and the quality of the workforce will contribute to creating productivity-driven economies.

It is widely recognized that FDI inflows are of great importance to the financial performance development of emerging and developing countries. However, their impact on bank loans has so far not been subject to accurate empirical assessment. This paper aims to fill this gap by providing an in-depth quantitative analysis of the impact of FDI inflow and FDI stock, separately, on bank loans for both conventional and Islamic banks in GCC countries. It distinguishes between direct and indirect channels through which FDI inflows may affect bank loans. The study uses both static and dynamic panel GMM estimation techniques to analyze the data.

The purpose of this paper is to examine the determinants of foreign direct investment (FDI) by focusing on institutional and economic factors among South Asian Association for Regional Cooperation (SAARC), Association of South East Asian Nations (ASEAN) as well as Central Asian countries over the period 2002-2014.

The generalized method of moments technique is employed for analyzing the impact of institutional quality on FDI inflow by controlling for the effect of market size, domestic investment and labor force.

The authors found large variations in terms of the impact of institutional and economic variables in regards to FDI in the SAARC, Central Asian and ASEAN regions. The results reveal that real GDP, domestic investment and economic freedom index have a positive and significant effect on FDI inflows in the SAARC region, while governance index and labor force have a negative impact on FDI inflows. In Central Asia, the real GDP, domestic investment and governance index are positively associated with FDI inflows, whereas the effect of economic freedom index on FDI is negative as well as insignificant. Apart from the GDP, other variables such as labor force, domestic investment, governance and economic freedom indices influence FDI positively in the ASEAN region. It is worth mentioning here that domestic investment produces positive effect on FDI inflows in all the regions. On the whole, the authors may conclude that institutional factors play an important role in attracting FDI inflows in the ASEAN region as compared to Central Asian and SAARC regions.

A limited research work is available that could help in identifying the role of institutional and economic factors simultaneously in attracting FDI in the SAARC, Central Asian and ASEAN regions.

This study aims to analyse the intellectual property rights (INPR), foreign direct investment (FDI) inflows and technological exports of 32 developing and developed countries for the period of 2006–2020.

Diagnostic tests were used to confirm the panel least squares, fixed effect, random effect, feasible general least squares, dynamic ordinary least squares and fully modified ordinary least squares estimator results as well as to increase the robustness.

According to the findings for the developing countries, trademark, patent and industrial design applications, each had a significant positive long-run effect on FDI inflows. In addition, there was a significant positive long-run relationship between patent applications and medium- and high-technology exports. Meanwhile, trademark and industrial design applications had a significant negative long-term effect on medium- and high-technology exports. In developed countries, patent and industrial design applications each have a significant negative long-term on medium- and high-technology exports. Furthermore, patent and trademark applications each had a significant negative long-run effect on FDI inflows.

This study contributes significantly to the focus that host countries evaluate the technology gaps between domestic and foreign investors at different industry levels to select the best INPR rules and innovation process by increasing international cooperation. Furthermore, the host countries should follow the structure–conduct–performance paradigm based on analysis of the market structure, strategic firms and industrial dynamics systems.

The international business literature presents an interesting intellectual puzzle regarding the effect of political instability and political risk on foreign direct investment (FDI). Survey evidence shows that multinational executives take into account political instability in making investment decisions, while econometric studies produce conflicting findings. In this paper, I offer a new theory that explains how political violence, an extreme form of political instability, affects FDI. The new theory differs from previous arguments on three points. First, the theory considers how rational expectations and uncertainty on the part of foreign investors affect the ways in which political violence influences investment behaviors. Second, the new theoretical argument argues for the need to investigate separately the effects of different types of political violence (civil war, interstate war, and transnational terrorism). Third, I consider FDI inflows as resulting from two distinct but related decisions, including the investment location choice and the decision on investment amount, and sort out statistically the separate effects of political violence on these two processes. The empirical analysis of FDI inflows covers about 129 countries from 1976 to 1996. The statistical findings largely support my theoretical expectations. My theory helps reconcile the inconsistent econometric findings on the effect of political instability on FDI flows.

Financial sustainability in emerging market economies crucially depends on stable foreign capital inflows as these countries lack adequate domestic capital and sophisticated technology. This study attempts to examine the impact of major political risk factors in the emerging market economies along with basic economic fundamentals such as institutional variables like per capita electric consumption, trade openness, and real rate of interest. We have followed a static panel data approach in studying the impact of these crucial variables in Foreign Direct Investment (FDI) inflows in 15 major emerging economies for the period 2000–2014. Risk perceptions, i.e., political risk data, have been collected from the International Country Risk Guide (ICRG) provided by the Political Risk Services (PRS) Group. In our research purpose, we have considered dependent variable as FDI inflows for 15 emerging countries during the period 2000–2014, which are drawn from the United Nations Conference on Trade and Development (UNCTAD, 2014, 2015) FDI database. Our results demonstrate that there are six subcomponents of risk perception (political risk) which are statistically significant in explaining variation in FDI inflows of the major emerging countries. The results show that government stability, socioeconomic conditions, religious tension, and bureaucracy quality have a positive impact on FDI inflows of emerging countries, whereas internal conflict and law and order have a negative impact on FDI inflows of these countries. Stable government is more attractive to foreign investors. Again, an improvement in the socioeconomic conditions is positively related with FDI inflows in emerging countries. Decreasing bureaucracy leads to a reduction in corruption, and assists expanding FDI flows in the emerging country.