Foreign Direct Investment, Portfolio Investment, and Economic Growth in Indonesia: Vector Auto Regression Approach

The goal of this research is to examine the Foreign Direct Investment (FDI), Portfolio Investment (PI) and Economic Growth (EG) correlation in Indonesia.  This research is using the Economic growth, foreign direct investment and portfolio investment data during 2010-2016, which is accessed from  www.bps.go.id; www.bkpm.go.id and www.bi.go.id, and using Vector Auto Regression method. The result shows that FDI and EG have two way correlationship, meaning the connection between  past Indonesia FDI and recent Indonesia EG are exist. PI and EG have the same correlationship yet it does not influence the investors to invest at the Indonesia Stock Exchange, as they, particularly foreign investors, are looking forward to the Indonesia Macro-economy policies or recent information about it

FDI and FPI Determinants in Developing African Countries

We examine drivers of foreign direct investment (FDI) and foreign portfolio investment (FPI) in nine selected African economies, during the period 1980 to 2014, with particular interest in the role of financial market development. We set out to explore the drivers of FDI and FPI in selected African countries, respectively. We employ the dynamic GMM methodology to assess the motivators of inward foreign flows. The results show that FDI inflows are generally dependent on past inflows of FDI, low inflation, infrastructural development, and real GDP growth rate; while stock market capitalisation, commercial bank assets gauged against commercial and central bank assets as well as domestic credit to the private sector by banks intermediate for financial market development. On the other hand, we find that FPI inflows are attracted to foreign destinations due to previous FPI inflows, the real exchange rate, inflation rates and the presence of developed infrastructure. Further, developed financial markets, as proxied by stock market capitalisation, were found to significantly and positively influence inward FPI flows, while a closed financial account and low interest rate discouraged FPI. The significant contribution of this paper is that its findings empirically confirm FDI and FPI theory, as postulated in Dunning’s eclectic paradigm insofar as the main “location†variables that enhance host country attractiveness are concerned, specifically in the African context. In light of these findings, we recommend that policy makers strengthen their domestic markets, complemented by appropriate regulations and institutions to attract foreign investment flows, while reducing their dependency on international aid and loans.&nbsp

ICT Innovation, FDI and Economic Growth: Evidence from BRICS

We make a comprehensive investigation of ICT innovation, FDI and economic growth nexus for BRICS countries for the periods between 1990 and 2021 using autoregressive distributed lag (ARDL) techniques. We use input-based ICT and non-ICT resources to capture ICT innovations, foreign direct inflows, gross domestic product and quantity of labor for this economic bloc. From our estimation, the following summary can be made. ICT is found to be consistently and significantly contributing to the economic growth rate of BRICS countries. However, with the negative impact of FDI on the growth rate, its interaction with ICT input resources was found to help mitigate the negative impact of FDI on economic growth which by implication suggests that adequate ICT infrastructure complemented with foreign-oriented investment can play a formidable role in increasing the growth process of the economies of BRICS. Also, non-ICT input resources and quantity of labor growth rate were found to be necessary variables worthy of giving appropriate consideration in explaining the growth rate of the economies. The study thus suggests the higher provision of both ICT and non-ICT input resources in the BRICS and a policy to attract able hands from developing countries to turn various resources for economic progress

Drivers of Foreign Direct Investment in Egypt

This article set out to analyse the occurrence of foreign direct investment (FDI) in the North African country of Egypt. Various macroeconomic variables were examined to determine their effect on attracting FDI inflows towards Egypt. Using OLS, we sought to identify key determinants of FDI in Egypt. Despite natural resource endowment in gas, oil and alternative energy – there was no evidence that foreign investors were flocking to Egypt for the natural resources. On the other hand, it was established that financial market development plays a pivotal role in harnessing inward FDI. It is recommended that the Egyptian government removes barriers to trade, strengthens institutions, and continues the momentum of providing an investor-friendly environment for foreign investors so as to improve its attractiveness and increase its potential to harness more FDI to push its economic growth agenda as a developing African country

The long-run and short-run effects of foreign direct investment, foreign aid and remittances on economic growth in African countries

This paper investigates the long-run and short-run effects of foreign direct investment (FDI), foreign aid and migrant remittances on economic growth in 36 African countries over the period 1980–2016. Empirical evidence is based on Pooled Mean Group (PMG) approach. The following findings are established. First, while there is a positive and significant long-run relationship between foreign direct investment and economic growth in Africa as a whole, the effect of remittances and foreign aid is insignificant. Second, in the short-run there is no evidence of any significant impact of FDI, remittances and foreign aid on economic growth. Third, results are still robust in the short-run when the panel is divided in three subsamples. However, in the long-run the effects of FDI, remittances and foreign aid on economic growth depend on the income level

Drivers of Foreign Direct Investment in Egypt

This article set out to analyse the occurrence of foreign direct investment (FDI) in the North African country of Egypt. Various macroeconomic variables were examined to determine their effect on attracting FDI inflows towards Egypt. Using OLS, we sought to identify key determinants of FDI in Egypt. Despite natural resource endowment in gas, oil and alternative energy – there was no evidence that foreign investors were flocking to Egypt for the natural resources. On the other hand, it was established that financial market development plays a pivotal role in harnessing inward FDI. It is recommended that the Egyptian government removes barriers to trade, strengthens institutions, and continues the momentum of providing an investor-friendly environment for foreign investors so as to improve its attractiveness and increase its potential to harness more FDI to push its economic growth agenda as a developing African country

Be Nice to thy Neighbours: Spatial impact of Foreign Direct Investment on Poverty in Africa

This study examines the spatial impact of FDI on the poverty of 44 African countries. In achieving this, the study uses the Driscoll-Kraay fixed effect instrumental variable regression, instrumental variable generalised method of moments estimator (IV-GMM), and the spatial durbin model. The empirical investigation of this study yielded four significant findings: (1) neighbouring countries’ FDI has a positive and significant impact on the incidence and intensity of host country’s poverty. (2) Improved institutional quality in neighbouring countries has a significant impact on FDI-poverty reduction nexus of the host country. (3) the empirical results lend support for a significant spatial spillover of poverty in the region. (4) the marginal effect results indicate that countries within the region are no longer in isolation or independent, i.e., the level of poverty in a particular country is influenced by its determinants in the neighbouring country. This result is robust to the alternative proximity matrix, which is the inverse distance. Since there is spatial interdependence among African countries, we recommend that African governments through the African Union (AU) should not only champion the institutional reform in the region, but also establish a binding mechanism to ensure reform implementation

Relevance of governance quality on the effect of foreign direct investment on economic growth: new evidence from African countries

Despite the large volume of studies on the direct impact of foreign direct investment on economic growth, the results remain inconclusive. This has led researchers to examine the channels through which FDI affects economic growth. Evidence suggests that institution quality can improve economic growth by increasing foreign direct investment in the host countries. As governance quality is improving in African countries during the last decade, the aim of this study is to investigate the relationship between foreign direct investment, governance quality and economic growth in 51 African countries over the period 1998-2015. The empirical evidence is based on Generalized Method of Moments. The following findings are established. First, there is an unconditional positive effect of foreign direct investment on economic growth in African countries. We also find a positive and significant relationship between governance quality and economic growth. Second, these findings are still robust when we use the composite governance quality indicators. Three, when regards at interaction terms between governance quality and foreign direct investment, we find a convincing evidence that governance quality moderate favorably the effect of FDI on economic growth. Four, the moderate effect of governance quality on foreign direct investment and growth nexus still robust with composite governance quality indicators. Overall this study has established net direct positive and significant effect of foreign direct investment on economic growth and that this effect is enhanced by good governance. The major implication from our study is that African countries should improve their governance quality to benefit more from FDI in terms of achieving better growth outcomes

Do accounting standards matter for foreign direct investment in developing countries?

This study investigates the macroeconomic implications of the adoption of International Financial Reporting Standards (IFRS) in developing countries. The current study specifically examines the relationship between IFRS adoption and Foreign Direct Investment (FDI) inflows to developing countries. A total of 116 developing countries with available data were used for the study analysis. A panel data averaged over three non-overlapping years from the period 1996-2013 for the sampled countries was used for the empirical analysis. The efficient two-step System Generalized Methods of Moment estimation technique with Windmeijer corrected standards errors and orthogonal deviations was employed to examine the empirical relations. Results from the dynamic panel GMM estimation demonstrate that IFRS adoption on its own does not affect the amount of FDI inflows to developing countries. This finding thus suggests that adopting IFRS alone may not be enough for developing countries to attract the much needed FDI inflows. Results from this study therefore calls for the need to further examine the conditions under which developing countries could harness the economic benefits of adopting the IFRS