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West Africa has been grappling with various security challenges prompting governments’ intervention via military expenditure both at the country and regional level. Given the sporadic surge in military expenditure in the region and the potential effect such expenditure may exert on investment which is a sin qua non to the development process of any economy or region, this study utilizes the augmented mean group (AMG) approach and the Granger non-causality test in investigating the impact and causal relationship between investment and military expenditure in the Economic Community of West African States (ECOWAS) between 1980 and 2020. With country-specific cross-dependence and heterogeneity adequately accounted for, the study found that military expenditure has a dampening impact on investment at both the panel and country levels; unemployment adversely impacts investment; whereas economic growth stimulates investment (catalytic effect) in the ECOWAS, although at differing levels of significance. The study also established a long-run relationship among the variables; with only economic growth Granger causing investment. The study thus recommends that country-specific and regional-based military policies be established to glean economic growth through viable investment.

This study investigates the impact of foreign direct investment (FDI) on bank stability in the Gulf Cooperation Council (GCC) region, differentiating between Islamic and conventional banks. The results reveal a negative relationship between FDI and bank stability, and Islamic banks can mitigate this impact, enhancing overall stability. Notably, during recent crises (the global financial crisis (GFC) and the COVID-19 pandemic (COVID-19)), FDI's effect on bank stability intensified, and the GFC had a stronger influence than COVID-19. Islamic banks were more resilient to FDI during these crises, highlighting their pivotal role in strengthening the banking system across the member countries in the GCC. The study offers critical insights for regulators, policy makers, and risk managers, advising cautious supervision over FDI in order to preserve monetary and financial stability.

The present study examines the patterns of foreign direct investment (FDI) in Kazakhstan and draws comparisons with global trends. Based on statistical data spanning from 2000 to 2022, the study reveals that the growth of FDI in Kazakhstan has exhibited greater volatility and speed compared to developed nations. However, it is strongly associated with global FDI inflows and the growth of gross domestic product (GDP). This article aims to examine the patterns and determinants influencing FDI in Kazakhstan and to juxtapose these patterns with global trends. The main approach used in the study was systematic. The article’s contribution lies in its provision of novel insights into the dynamics of FDI in Kazakhstan and its correlation with economic growth. Furthermore, the article elucidates the various factors that contribute to the expansion of FDI in Kazakhstan, while also offering suggestions for the development of public policy in this domain. The article provides a comprehensive examination of FDI patterns in Kazakhstan, comparing them to global trends and identifying the factors that influence the dynamics of FDI. Furthermore, the article offers suggestions for expanding the economic base of Kazakhstan beyond its reliance on the oil and gas industry, enhancing focus on high-tech and innovative sectors, and enhancing the institutional framework.

We examine the effect of outward foreign direct investment (OFDI) on total factor productivity (TFP) of home (source of FDI) countries in a global sample of 85 economies, distinguishing between outward greenfield FDI (OGFDI) and outward cross-border merger and acquisition (M&A) purchases. The goal of the study is to test for reverse technological spillovers to the FDI source country. The hypothesis is that OGFDI and M&As have different capabilities of carrying out reverse technological spillovers, which would affect the TFP of home countries differently. We apply a two-step system generalized method of moments (GMM) to deal with possible endogeneity and find the following results. First, total OFDI has no effect on the home country's TFP. Second, disentangling OFDI by mode of investment reveals both positive and negative reverse spillovers from FDI to TFP. While OGFDI produces negative reverse spillovers on the TFP of an MNE's home country due to displacement of production and reduced competition at home, M&A purchases produce positive reverse spillovers on the TFP of an MNE's home country due to their potential to acquire high-value knowledge assets. Third, home countries' human capital development positively moderates the impact of OGFDI and M&A purchases on TFP, while trade openness positively moderates only the M&A impact on TFP. Our findings imply that policies that seek to promote OFDI can be beneficial once countries have reached a certain degree of human capital development and participation in international trade.

Income generated by foreign direct investments (FDI) has grown since the 1990s, and now represents a substantial portion of many countries' current accounts. Some of these flows are routed through Special Purpose Entities in financial centers that multinational firms use to minimize their tax liabilities. We use IMF and OECD data to evaluate the impact of this income on the income share of the top 1% of households in the multinationals' home countries. We distinguish between FDI equity income and FDI interest income arising from intra-firm lending. We also consider separately the effects in advanced economies from those in financial centers. FDI equity income contributes to the income share of the top 1% of households in advanced economies, while FDI interest income has no impact in these economies. Similar results for these countries are recorded when we use the OECD non-SPE data. As a result, total FDI income reinforces the income share of the top 1% of households in these countries. While there is some evidence of a similar impact by FDI equity income on the top 1% of households in the financial centers, this result is not apparent when non-SPE income data are used. [ABSTRACT FROM AUTHOR]

This study empirically examines the influence of tourism development, renewable energy and green finance (GF) on high-quality economic development. Using data from 33 years of data in China from 1990 to 2022, this study applies Gregory Hansen analysis to investigate the relationships between tourism development (TD), renewable energy (RE), green finance, and high-quality economic development (HQED), and accepts a Spatial auto regressive. This study demonstrates that tourism development plays a crucial role in promoting high-quality economic growth by positively impacting all three of its components. Moreover, the utilization of renewable energy further enhances the beneficial influence of green finance on the promotion of superior economic growth (EG), while also impacting the correlation between foreign direct investment (FDI) and superior economic growth. Our study suggests three policy recommendations for policymakers based on these findings. These recommendations include strengthening the integration of tourism development with GF, establishing an environmental disclosure framework to oversee local governments in enhancing the effectiveness of GF, and implementing medium- and long-term favorable policies as an external intervention strategy to encourage green finance in the private sector.

This paper analyses industrial upgrading possibilities for the Hungarian economy in light of recent changes in global Foreign Direct Investment activities. The changing economic landscape provides a reason to investigate the impact of the recent developments in Hungary, a country with an open, dependent economy. The study investigates how the front-running sector, the manufacturing industry, performs during the current, turbulent times. Does it upgrade from the earlier assembly-focused positions in global value chains, or are there any signs of deterioration by backshoring certain activities to the headquarters of multinational companies? By using both primary and secondary research and conducting a regional comparison, the study finds that the Hungarian economy still shows the characteristics of a “factory economy”, but progress has been made towards the aspired “knowledge economy” status.

The present study examines the extent and direction of horizontal, backward and forward spillover effects of FDIs on firms' productivity. It also shows how the mediating factors (firm's age, export and import intensity, R&D and advertisement intensity) contribute to the firms' productivity. Further, the study also uncovers the importance of the ownership patterns of the firms that affect the spillovers. It uses a balanced firm-level panel data set from the Indian manufacturing industries over the available period 2003 to 2016 to examine the inter- and intra-industry spillovers of the FDIs. The estimation methods used in this study are the fixed effects approach and the generalised method of moments. The study also applies the Levinsohn-Petrin method to compute firm-level productivity. It finds a significant positive spillover backward effect and confirms the supportive role of the mediating factors in augmenting the spillover channels. However, the results do not support the existence of horizontal and forward FDI spillover effects for the overall manufacturing industries. They suggest that a comprehensive policy package approach be used, thereby underlining the importance of all channels of the FDI spillover effects and their relations to the downstream sector, particularly by keeping the performance of the firms and their external links in perspective.

This paper examines the role of information and communication technology (ICT) in modulating the effects of foreign direct investment (FDI) on economic growth in North Africa (Morocco, Algeria, Tunisia, and Egypt) over the period 1995 to 2021. Using advanced quantitative methods, including quantile regression, and comparing with Two-Stage Least Squares (2SLS) regression and Generalized Method of Moments (GMM), the study assesses the impact of FDI and ICT on growth, controlling for country fixed effects. The results indicate that FDI has a significant positive impact on growth, particularly when interacting with transmission channels, notably the telephone (mobile and fixed). However, the interaction with the internet varies according to quantile levels, showing positive effects at low quantiles and negative effects at high quantiles. The study highlights the importance of investment policies, digital inclusion, and research to optimize the benefits of FDI in the region.

This is a study of the effects of sectoral FDI inflows on the rates of change of forest land and the ecological footprint of economic activity measured in forest land. We test the “FDI ecological halo” hypothesis (Doytch, 2020) for nine distinct sectoral FDI inflows, including agricultural FDI, mining FDI, manufacturing FDI, construction FDI, financial FDI, transport FDI, tourism FDI, communications FDI, and trade services FDI, in addition to total FDI, using a global sample of countries and a GMM econometric approach. We find that one percentage increase (% GDP) in agricultural FDI, mining FDI, manufacturing FDI, and construction FDI can reduce 2.87 %, 1.76 %, 0.19 %, and 1.28 % of forest land area, respectively, and all but manufacturing FDI, increase the forest land footprint from. At the same time, the results associated with services FDI are mixed: trade services FDI hurts the forest environment, while one percentage increase (% GDP) in communications FDI, financial FDI, and transport FDI can increase forest land area to 0.24 %, 0.02 %, and 3.02 %, respectively. In the case of tourism FDI, the results are mixed. The results suggest that FDI in sectors that are “closer to nature”, such as agriculture and mining are more prone to cause harm to forests and therefore need to be regulated with maximum stringency. Some services FDI, such as communications FDI and financial FDI could be stimulated without harm to the forest environment.

We examine how generations X, Y, and Z might react to market-moving events over short- and long-term horizons to maintain an optimal balance among risk, return, and investor preferences. To analyze various portfolio variants, we use data on selected global assets and several types of economic and non-economic events for 2000-2021H1, applying the mean-variance optimization procedure. According to our results, in optimal portfolios, fixed-income assets dominate and are the main driver of portfolio adjustments. Portfolios with short-term horizons with less risk-averse investors and those for generation Z are the most reactive to analyzed types of events. None of the events per se creates an extraordinary opportunity to increase returns. However, expansionary monetary policy generates the greatest potential for incremental returns. Our findings provide practical implications for investors on how to adjust their portfolios in response to significant market events.

This study empirically examined the role of the country’s absorptive capacity on the impact of domestic investment on economic growth in the selected five African countries over the study period of 1970 to 2019. In specific, the study examined the impact of domestic investment on economic growth from two models, without the country’s absorptive capacity and with the country’s absorptive capacity. Further, a robust linear ordinary least squares (OLS) methodology including static panel OLS and panel cointegration estimators was employed. The study found that only changes in financial development and infrastructures positively cause changes in the domestic investment-economic growth nexus in the short run while in the long run, trade openness enhances the positive impact of domestic investment on economic growth in African countries. In addition, the study found that domestic investment retards economic growth without the country’s absorptive capacity in the short run and long run respectively in African countries. Therefore, the study recommended that policymakers should invest heavily in infrastructure and financial development systems as well as encourages trade openness for a stable domestic investment-economic growth nexus in African countries.

This study assesses, from the perspective of financial stability, how business/financial sustainability, moderates the influence of information technology on female economic participation in 49 countries in Sub-Saharan Africa for the period 2008–2018. The empirical evidence is based on Tobit regression, which accounted for the censored nature of the outcome variables. The following important findings were obtained: First, ICT (information and communications technology) dynamics (mobile phone penetration, internet penetration, and fixed broadband subscriptions) are consistently moderated by business sustainability to positively affect female employment. Second, business sustainability scores must exceed certain thresholds before moderating fixed broadband subscriptions to induce favorable overall effects on female employment, female labor force participation, and female unemployment rates. The positive effects on female employment and labor force participation is ascertained by the thresholds of 18.742 and 19.505 Z-scores, respectively and a Z-score of 17.300 for the negative impact on female unemployment. The thresholds that should be exceeded are within policy reach, make economic sense, and are policy-relevant. This study contributes to the extant literature by providing actionable thresholds for business sustainability that can be employed by policy makers such that information technology positively influences female economic inclusion in Sub-Saharan Africa.

We investigate whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated thresholds for exchange rate regimes (ERRs) in emerging market economies. The impact of GFC is higher under more flexible ERRs for aggregate capital and portfolio inflows. FDI inflows are determined by growth. The sensitivity of aggregate and other investment inflows to growth is higher under more rigid ERRs. Our results also suggest that managed ERRs encourage capital inflows by allowing countries to import the monetary policy credibility of the anchored country and to provide an exchange rate guarantee.

The study aims to empirically determine whether a higher level of trade openness and the presence of better legal protection for investors enhances the impact of trade bloc membership on capital mobility based on four trading blocs: Eurasian Economic Union (EAEU), Central American and Dominican Republic Free Trade Agreement (CAFTADR), Central European Free Trade Agreement (CEFTA), and the Pacific Alliance. This study employs the fully modified and dynamic ordinary least squares estimators and a panel quantile regression cointegration estimator. The study finds that a country’s affiliation with a trade bloc improves capital mobility in the whole group and EAEU region, low capital mobility in the Pacific Alliance region and moderate low capital mobility in the CAFTA-DR region. The legal protection system alone provided for the investors does not improve the level of capital mobility unless its interaction with investment is included. Also the study reveals that high trade openness does not necessarily lead to better capital mobility for the studied trade blocs.

The relationship between institutional quality, financial development, and economic growth has been well documented in the literature. However, much less work has been done the effect of judicial independence (JI) on financial market development (FM) in particular. This paper fills that gap using the JI score and FM in the context of 23 emerging markets (as identified by the Financial Times Stock Exchange Group) over the period 1980–2021. Overall, the results suggest that, in selected emerging markets JI fosters FM. Interestingly, the results across various quantiles of JI show that low JI hampers FM, but a medium and high level of JI boosts FM in these markets. These results are robust to several specifications. To the best of our knowledge, this is the first study to examine the direct impact of JI on FM and confirms the theories on new institutional economics as well as law and finance in emerging markets.

Emerging Market and Developing Economies (EMDE) countries are the leading destinations of Foreign Direct Investment (FDI). We investigate whether prudent monetary and fiscal policy through indicators that reflect the expectations concerning the central bank's commitment to a target and the sustainability of government finance affects FDI inflows. Based on a large sample of 75 EMDE countries from 1990 to 2019, we provide empirical evidence through panel data analysis that prudent macroeconomic policies are an essential driver of FDI inflows. The findings support the view that using prudent monetary and fiscal policy can help enhance FDI inflows in EMDE countries.

Foreign direct investment (FDI) is of great significance to the economic development of developing countries; it infuses capital into enterprises, while propeling both technological advancement and economic efficiency. We examine whether zombie enterprises crowd out FDI inflows and whether the institutional environment can alleviate this effect. Using the Chinese Industrial Enterprise Database from 2003 to 2013 to calculate zombie shares at the prefecture-level cities and applying the OLS and instrumental variable estimation, we find that the larger the zombie shares, the less FDI inflows. That is, zombies do crowd out FDI inflows—a finding robust to specifications. We also find that the geographical advantage and greater openness to the outside world can alleviate the crowding-out effect. Further, we investigate the moderating effect of the institutional environment on the crowding-out effect. We find that market segmentation and government corruption will aggravate the crowding-out effect while strengthening intellectual property protection, improving the trust environment, and factor market development will alleviate it. Overall, our study explains impediments to FDI inflows by accounting for zombie enterprises. It provides insights for local governments seeking to clean up zombies and strengthen the institutional environment to attract FDI inflows.

The Doing Business indicators published by the World Bank serve as a proxy for assessing the quality of institutions and the business environment. In recent years, Doing Business scores or rankings have been used to evaluate choices affecting foreign direct investment decisions. The study purpose is to examine the extent to which the quality of institutions and the business environment, as reflected in the Doing Business indicators, is associated with higher foreign direct investment inflows in European Union countries. The paper uses data on member country performance based on selected indicators, the Corruption Perception Index, and data on work stoppages and strikes. The latter is used to capture the importance of the labour market environment and political stability. Panel data cover the period 2005–2020 for most European Union member countries. The results suggest that the quality of business and institutional environments is an important factor in attracting foreign direct investment inflows. These results vary considerably depending on the countries chosen and have important policy implications. Specifically, governments should put emphasis not only on the general functioning of the economy, but also on the improvement of institutional quality to attract foreign direct investment. [ABSTRACT FROM AUTHOR]

This study estimates the impact of corporate taxes on direct foreign investments in developing countries using corporate tax data from 1990 to 2015 put together for the study. The corporate tax database consists of statutory corporate tax rates from 65 developing countries across different regions of the world, including Africa, Asia, Latin America, the Caribbean, and the Middle East. Results from the study indicate that direct foreign investment is not sensitive to corporate taxes in developing economies. This suggests that the flow of foreign investments into developing host nations may be primarily driven by other factors like the availability of natural resources, infrastructure, trade, and other government policies. [ABSTRACT FROM AUTHOR]

International capital movement in the form of Foreign Direct Investment (FDI) by multinational enterprises (MNEs) signifies a widely researched phenomenon in comprehensive review of the FDI literature. Its vastness makes it impossible to fathom its depth, as such the paper highlights what the author considers to be mainstream theories in the domain of empirical studies on FDI. This study critically reviews (FDI) literature over a period of 70 years from 1950 to 2020 to provide a theoretical lens for future research beyond the established models. The discussion covers the mode of FDI inflows, statistical methods applied, theoretical models, contributions to paradigms and empirical papers investigating FDI. Furthermore, the papers selected cover heterogenous geographical regions, while in certain papers FDI has been studied as a dependent variable in others as an independent one. The focus lies on the FDI and its resultant activities of MNEs in the form of subsidiaries to carry out market seeking, strategic asset-seeking and efficiency seeking activities. Though, most researchers have narrowed down to four determinants of FDI i.e., motives of MNEs for undertaking FDI, size of MNEs, entry modes into host country and investments sector recently, many works have applied formal theories to provide a framework for market failure such as holdup problems, non-fulfillment of contracts and related agency costs. It is concluded that FDI has evolved into a significant area of empirical investigation. Overall, the gaps and opportunities in existing literature are identified thereby directions for further research emerge.

AbstractThis paper analyzes the contribution of foreign direct investment (FDI) to economic growth in Côte d’Ivoire, for the period 1980–2019. We use the World Development Indicators (World Bank) database. The Autoregressive Distributed Lag (ARDL) cointegration approach results show that, in the short and long-run, FDI negatively impacts economic growth in Côte d’Ivoire. We conjecture that these results are due to the predominance of extractive FDI in Côte d’Ivoire. Indeed, the extractive sector is weakly linked to the national economy and is subject to practices of fraud and corruption. Our results also show the importance of education (human capital) in the country’s economic growth. All of these findings suggest the need for selective FDI attraction policies, the integration of the enclave extractive sector into the national economy and the strengthening of the education system for a more efficient human capital capable of absorbing and using new knowledge and high technologies transferred by FDI.

Our paper presents the first attempt to examine the non-linear relationship between the trade value of environmental commodities (TVEC) and energy security (ESP). Seven indicators are used in this article to illustrate four aspects of energy security, namely availability, acceptability, developability, and sustainability. We conducted our analysis by applying a variety of econometric techniques to a sample of 49 countries with low-incomes and low-middle-incomes (LI&LMICs), 33 countries with upper-middle-incomes (UMICs), and 42 countries with high-incomes (HICs). A nonlinear relationship has been demonstrated between the trade of environmental commodities (TVEC) and non-fossil energy consumption, energy intensity, energy consumption, CO2 emissions, and renewable energy consumption, indicating that the trade of green goods is beneficial for energy system acceptability, develop-ability, and sustainability. There is also evidence that TVEC and ESP exhibit long-term cointegration, and our results confirm this. The effect of TVEC on ESP varies dramatically between the subsamples by income level, with high-income countries showing a more apparent nonlinear relationship between TVEC and ESP.

The establishment of free trade pilot zones (FTZs) in China has constituted a pivotal endeavor to enhance global collaboration, foster economic restructuring and transformation, and attract foreign direct investment (FDI). These objectives are pursued through a series of strategies, including implementing a negative list system, reducing the threshold for FDI, and enhancing the FDI service framework. Based on panel data from 47 cities between 2005 and 2018, this research employs a spatial difference-in-differences model to empirically examine the spatial spillover effects of establishing FTZs concerning FDI. The findings reveal the substantial positive impact of FTZs on fostering FDI within respective domains. Conversely, an adverse spillover effect is observed on FDI in neighboring vicinities. Coastal FTZs have a negative spillover effect on FDI in surrounding areas, whereas inland FTZs have minimal impact on FDI in surrounding areas. The first and third batches of FTZs have had negative spillover effects on FDI in surrounding areas, while the second batch of FTZs has had no significant spatial spillover effect on FDI. Based on the empirical conclusions, this study proposes policy recommendations to broaden the scope of FTZs, refine the spatial spillover mechanism, and foster the diversified development of FTZs. These measures are envisaged to optimize the efficacy of the FTZ strategy to advance FDI objectives.

AbstractThis paper investigates the threshold impact of government debt on economic growth in the presence of fiscal consolidation in South Africa from 1979 to 2022. The autoregressive threshold regime (TAR) model and two-stage least squares (2SLS) are used. The contribution of the paper is on the estimation of the threshold of government debt using the first difference, dummy variables, and the TAR in the presence of fiscal consolidation in South Africa. The TAR provides evidence with the consideration of fiscal consolidation, there is evidence of the U-shape impact of domestic government debt on gross domestic product per person. At a high threshold, there is evidence of an S-shape impact on gross domestic product per person when there is a range threshold. Overall high domestic government debt harms gross product per person and results in fiscal consolidation not being able to stimulate gross domestic product per person. It is recommended for fiscal authorities to not use fiscal consolidation when the domestic government debt is above 60% in South Africa.