Three empirical essays on foreign direct investment, research and development, and insurance

This dissertation consists of three independent essays, all of which are empirical treatmentsof different determinants of economic growth.The first essay, which is in Chapter 2, evaluates the role economic freedom playsin mediating the effect of foreign direct investment (FDI) on growth. It tests whethercountries with sufficiently high level of economic freedom can exploit FDI more efficiently. Ituses cross-country observations from 84 countries for the 1976-2005 period. It applies athreshold regression which is flexible enough to accommodate the possibility that theimpact of FDI on growth ‘kicks in’ only when the level of economic freedom exceeds someunknown threshold. The results show that FDI has no direct (linear) effect on output growth.Instead, its impact is conditional on the level of economic freedom in the host countries.Only countries whose level of economic freedom has exceeded the threshold level ofeconomic freedom benefited from FDI inflows. In countries below the threshold level, FDIdeliver no beneficial effects. The findings are robust to several sensitivity checks andconsideration of endogeneity.The second essay (Chapter 3) tests the channels and magnitude of R&D spilloversfrom developed countries to East Asian countries (China, Korea, Malaysia, Singapore, andThailand). It examines three possible spillover channels - imports, inward FDI, and outwardFDI - using panel data for the period 1984-2005. It uses a novel panel estimator whichallows for cross-sectional dependence and provides country-specific estimates of R&Deffects. There are several important conclusions emerge. First, both domestic and foreignR&D are important for productivity improvements. Second, imports are the most importantchannel of spillovers while spillover effects via FDI in uncertain. Third, there is someevidence that domestic R&D helps to increase the incidence of R&D spillovers, especiallyvia import channel. Fourth, the U.S. is a relatively stronger provider of spillovers thanJapan.Chapter 4, which is the final essay, examines the impact of insurance sectordevelopment on output growth, capital accumulation and productivity improvement. It usespanel data from 52 countries for the period 1981-2005, and applies a recent generalizedmethod-of moments (GMM) dynamic panel estimator. The results show that thedevelopment of insurance sector is important for long-run output growth, capitalaccumulation and productivity growth. For developing countries, insurance affects growthpredominantly through capital accumulation while in developed countries it enhancesproductivity growth. The findings are robust to biases introduced by unobserved countryspecificeffects, simultaneity, weak or numerous instruments. It remains valid even aftercontrolling for bank and stock market developments

Studies On Formulations For Gold Alloy Plating Bath To Produce Different Shades Of Electrodeposits. [TS693. Z27 2004 f rb] [Microfiche 7565]

Kajian untuk memformulasi larutan pengelektrosaduran aloi emas secara sistematik telah dilakukan dengan menggunakan kaedah rekabentuk eksperimen. The systematic studies on formulations for gold alloy plating baths were conducted by employing experimental design

Bank lending channel of monetary policy: dynamic panel data evidence from Malaysia

This paper aims to investigate the relevance of bank-lending channel (BLC) of monetary policy in a small-open economy, i.e. Malaysia by using disaggregated bank-level data set. A dynamic panel data method namely GMM framework proposed by Arellano and Bond (1991), Arellano and Bover (1995), and Blundell and Bond (1998) have been used in estimating the dynamic of banks’ loan supply function. The empirical evidence has stated that monetary policy shocks is significantly and negatively influenced the banks’ loan supply, and therefore has supported the existence of BLC in Malaysia. In addition, several bank-characteristics variables namely bank liquidity and bank capitalization (capital adequacy ratio) are also statistically significant in influencing the banks’ loan supply. Therefore, the implementation of monetary policy is effective in influencing economic activity via bank balance sheet position, in particular bank loans.Bank-lending channel, monetary policy, dynamic panel data

Foreign direct investment, economic freedom and democracy

This study examines the simultaneous role played by economic freedom and democracy in attracting foreign direct investment (FDI) inflows. In order to investigate this relation, data from a sample of 87countries over the period of 1981-2010 is employed. The main finding shows that the influence of economic freedom on FDI inflows is positive and significant. However, the results suggest that the democracy has no significant role in attracting FDI. The findings indicate that there is no evidence to support the idea that simultaneous occurrence of economic freedom and democracy are required to attract MNEs presence. Instead, the results reveal that improvement in economic freedom alone is sufficient to attract more FDI inflows. This finding is not consistent with Friedman’s view that free markets and political freedom are inseparable. Obviously, MNEs respond only to improvement in freedom of economic activity but not the level of democracy

Capital account liberalization and economic performance in Malaysia

This study examines the impact of capital account liberalization on economic growth in Malaysia from 1970 to 2004. It uses two measures of capital account openness, namely de jure (an index of liberalization) and de facto (the volume of capital flows). The empirical results based on the modified growth model demonstrate that the de jure measure of capital account liberalization shows an adverse effect on growth in Malaysia. However, the de facto measure shows a robust positive effect on economic growth. The results also highlight that the effect of capital account liberalization on growth is contingent on a country's level of financial development and the quality of its institutions

Firm-level investment and monetary policy in Malaysia: do the interest rate and broad credit channels matter?

This paper examines the effects of monetary policy on investment spending in Malaysia for 1990–2008 using firm-level data. The focal point of this paper is two main channels of monetary policy transmission mechanism, namely, the interest rate and broad credit channels. Using a dynamic neoclassical investment function, empirical results based on system generalised method of moments (GMM) estimations and a sample of 419 firms support the relevance of both interest rate and broad credit channels in influencing investment spending. The results also reveal that the effect of monetary policy channels on firm investment is heterogeneous, such that small firms (i.e. credit-constrained firms) are more responsive to monetary tightening when compared to large firms (i.e. less constrained firms)

Foreign direct investment and research & development activity: the role of competition

This paper investigates the relationship between foreign direct investment (FDI) and domestic research and development (R&D) activity, conditional on product market competition. The generalized Method of Moments (GMM) panel estimator is used to analyze the relationship using a sample of 61 countries over the 2000-2011 periods. The result reveals that FDI has little direct effect on R&D expenditure, but its effect manifests negatively conditional on competition. The finding contradicts with conventional wisdom regarding merits of competition as our evidence shows that competition undermines the effect of FDI on domestic R&D

The impact of European Monetary Union on finance-growth Nexus

This study examines the relationship between financial development and economic growth in 15 developed European countries before and after the formation of the euro. The results of the panel data analysis show that financial development is significant in promoting economic growth for both periods. The impact of the banking sector development on growth, however, is greater in the post-euro period, whereas the impact of stock market development on growth is reducing in the period investigated. The study concludes that the formation of European Monetary Union does not weaken the relationship between financial development and economic growth in developed European countries

Effects of R&D expenditure on employment growth : a dynamic panel analysis.

This paper estimates the effects of research and development (R&D) expenditure on the employment growth in Malaysian manufacturing sector during the period 2000 to 2008. Theoretical literatures devote the link between R&D and employment structure tends to suggest technological change has positive effects on job. Using dynamic panel GMM system estimation and 3 digit industry levels from manufacturing survey over the period 2000 to 2008, this paper find there is negative and significant relationship between R&D expenditure and employment growth. This is true when we consider with the second lag of the variable. Employment growth in Malaysian labour market however still favour to labour oriented and the absorption of the new technology is considered low