Cointegration and Causality Between Return on Investment and Foreign Direct Investment in Nigeria

Foreign direct investment (FDI) inflows into the Nigerian economy has not been stable. Notwithstanding this fluctuation, the country is still one of the largest destinations of FDI inflows in Africa. It is empirically unclear how return on investment affects FDI inflows in Nigeria. This paper investigates the effect of return on investment on FDI in Nigeria using yearly data for the period 1971 to 2015 by means of the (ARDL) approach. The study reveals the existence of a cointegration relationship among return on investment, electricity infrastructure, official exchange rate, real GDP growth, political instability, and FDI net inflows in Nigeria, It showed that both short-run and long-run relationships exist between return on investment and FDI net inflows, while both electricity and real GDP growth only has a long run relationship with FDI inflows. The Granger Causality Test reveals a unidirectional causality running from return on investment to FDI net inflows and not vice versa. The paper submits that return on investment, electricity infrastructure, and real GDP growth, exerted a positive and statistically significant influence on FDI net inflows in Nigeria. This shows they are important factors in determining FDI inflows. However, both official exchange rate and political instability did not have any significant effect on FDI net inflows both in the short-run and in the long-run. Thus, it is recommended that the Nigerian government should sponsor and host programs that will create the awareness that Nigeria is an investors’ haven. Keywords: Foreign direct investment (FDI), return on investment, ARDL, Granger causality, Nigeria

Membership has its Privileges - The Effect of Membership in International Organizations on FDI

We argue that membership in International Organizations (IOs) is an important determinant of FDI inflows. To the extent that membership restricts a country from pursuing policies that are harmful to investors, it can signal low political risk. Using data over the 1971-2005 period, we find that membership in IOs does indeed increase inflows of FDI. Controlling for the endogeneity of membership, we find this effect to be substantively important and robust to the method of estimation.membership in international organizations, FDI, investment climate, political risk, signaling, separating equilibrium

Remittances and Financial Inclusion in Development

In this paper we focus on the relationship between remittance inflows and financial inclusion in developing countries. We present single equation estimates on remittances and financial inclusion, and system estimates in which economic growth is explained by e.g., financial inclusion, and financial inclusion by, e.g., remittances inflows. These regressions clearly confirm our main hypothesis that remittances have a development impact through their effect on financial inclusion. Overall, our paper indicates the importance of studying the effects of remittances in developing countries. Remittances, in terms of size, are not only one of the main capital inflows in developing countries, often even more substantial than ODA, but they also appear to have a robust positive effect on economic growth.capital flows, remittances, finance

Capital Account Liberalization and Foreign Direct Investment

We examine the impact of capital account policies on FDI inflows. Using an annual panel dataset of 83 developing and developed countries for 1984-2000, we find that capital account openness is positively but only very moderately associated with the amount of FDI inflows after controlling for other macroeconomic and institutional measures. To a large extent, other country characteristics seem to determine FDI inflows instead of capital account policies. Furthermore, we find that capital controls are easily circumvented in corrupt and politically unstable regimes. We conclude that liberalizing the capital account is not sufficient to generate increases in inflows unless it is accompanied by a lower level of corruption or a decrease in political risk.Foreign direct investment, capital controls, capital flows, capital account liberalization

Foreign Direct Investment vs. Foreiegn Portfolio Investment

The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI is characterized by hands-on management style which enables the owner to obtain relatively refined information about the productivity of the firm. This superiority, relative to FPI, comes with a cost: a firm owned by the relatively well-informed FDI investor has a low resale price because of a "lemons" type asymmetric information between the owner and potential buyers. The model can explain several stylized facts regarding foreign equity flows, such as the larger ratio of FDI to FPI inflows in developing countries relative to developed countries, and the smaller volatility of FDI net inflows relative to FPI net inflows.

An Analysis of Gross Domestic Product from Foreign Direct Investments, Gross Capital Formation and Taxation

The paper analyzes the dependence of the Gross Domestic Product Variation on the evolution of Foreign Direct Investments, Gross Capital Formation and Taxation levels worldwide but also on regions and countries. The conclusion is that a boost to GDP growth through investment can only be achieved under the conditions of fiscal stability, which is necessary for high predictability in business processes

FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN TIMES OF ECONOMIC CRISIS: EVIDENCE FROM SOUTHEAST EUROPEAN COUNTRIES

Countries of Southeast Europe are at different levels of economic growth and accession to the European Union. Bulgaria, Romania and Croatia are already valid members of the EU. While Albania, Macedonia, Montenegro and Serbia have the status of the candidates for membership, Bosnia and Herzegovina still waits for the status of candidate for the accession to the EU. The common thing for all the referred countries is that they are far away from other members of the EU regarding their economic development. Therefore, foreign direct investments appear to be an important factor of speeding up the economic growth of these countries. Linear correlation between the foreign direct investments and the indicators of economic growth in the countries of the Southeast Europe is analyzed in the paper. The period before the economic crises and the period after the beginning of the economic crisis are analyzed separately, in order to observe the linear correlation between FDI and economic growth. The following variables are taken as indicators of the economic growth: GDP per capita, export, import and rate of unemployment. The results of the research speak in favor of the existence of a statistically significant correlation between FDI and other macroeconomic indicators in the period before the economic crisis in the majority of the analyzed countries. After the beginning of the economic crisis, the linear correlation has been extremely weak. Effects of the crisis very strongly influenced the economies of the observed countries

Gross Domestic Product and Foreign Direct Investment: Empirical Evidence from Vietnam

Foreign direct investment contributes to stimulating sustainable economic growth of each country, but economic growth plays an important role in attracting foreign direct investment. The empirical method was employed on a secondary time series data set during the period 2003-2018 to determine the impact of gross domestic product at current prices on foreign direct investment in Vietnam using a linear approach. The empirical results find that the relationship between gross domestic product and foreign direct investment is a positive sign at 1% significant level. Moreover, the study also shows that business freedom index and investment freedom index has a positive effect on foreign direct investment at 5% significant level. Based on the findings, the article recommends that Vietnam continues to seek positive solutions to enhance the economic growth rate, continuation in investment and business liberalization

The Impact of FDI Inflows, Exports and Domestic Investment on Economic Growth in Africa

The topic regarding the impact of foreign direct investment net inflows, exports and domestic investment on economic growth has resulted in mixed research findings across the globe. Literature related to the above variables in five selected African countries drawn from the five sub-regions is critically reviewed in this article. Furthermore, an econometric analysis of these variables is done to ascertain their impact on economic growth. The findings are compared to previous findings in other studies. The researcher found similar results in some variables when compared to previous researches in other countries. The study found that the independent statistical variables significantly predicted gross domestic product, with F (3, 63) = 5.84, P > F 0.0014, R2 = 0.2176, adjusted R2 = 0.1804 and root mean squared error (RMSE) = 0.54976. The independent variables added significantly to the prediction of p < 0.05. The researcher challenges the notion that the impact of foreign direct investment net inflows, exports and domestic investment on economic growth should always be positive and significant. This study provides a refreshed appreciation of the relationship between foreign direct investment net inflows, exports, domestic investment and economic growth in light of rapid socioeconomic changes in the sampled countries. The article also proposes some critical considerations regarding this relationship

Linking Global Competitiveness, Higher Education, and Foreign Direct Investment Inflows

Foreign Direct Investments (FDI) has contributed to the accumulation of capital and the improvement of the economy’s productive capacity through the incorporation of new inputs and modern technologies in the production process. Neoclassical and endogenous growth models have been widely used to empirically test the benefits of FDI (Almfraji & Almsafir, 2014). However, results of testing theoretical benefits are varying from regions, countries, and industries. Conflicting relationships and impacts range from significant to non-significant, positive to negative impacts, directly or indirectly. Despite that, FDI inflows have still been recognized to influence employment and wages, infrastructure development, human capital development, technology transfer, and promotion of trade which could have a short and long-term effect on economic of growth of a country. Recognizing the impact of FDI on the development of an economy, many researchers tried to elucidate the factors that encourage foreign countries to invest in a specific economy