The Effects of Political Stability on Foreign Direct Investment in Fragile Five Countries

• Autorzy: Tuğba Akın
• Języki publikacji: EN

Abstrakty

EN

In this study, effects of political stability, economic freedom and trade freedom of above-stated Fragile Five Countries consisting of Brazil, Indonesia, India, Turkey, and South Africa on the performance of FDI appeal was analyzed with first generation panel data analysis method for the 1996-2017 period. The cointegration analysis between series was conducted by means of Kao (1999) and Pedroni (2004) test. The analyses showed that political stability and trade freedom have a significant positive coefficient on the Fragile Five Countries' FDI. It was also determined that the impact of economic freedom on FDI was statistically insignificant. Thus, it was concluded that the most important determinant of FDI entry into countries is political stability. Error correction mechanisms of models have been working well. In addition, it was found that political stability, economic freedom, and trade freedom are the cause of foreign direct investment in the long-run. (original abstract)

Słowa kluczowe

EN

Direct investments; Foreign investment; Political situation; Economic freedom; Panel studies

PL

Inwestycje bezpośrednie; Inwestycje zagraniczne; Sytuacja polityczna; Wolność gospodarcza; Badania panelowe

• Czasopismo: Central European Journal of Economic Modelling and Econometrics (CEJEME)
• Rocznik: 2019
• Tom: 11
• Numer: nr 4
• Strony: 237--255

Twórcy

autor

Tuğba Akın

• Aydin Adnan Menderes University

Bibliografia

• [1] Aizhan K., Madiyarova, D (2013). Doğrudan yabancı yatırımlar ve ekonomik gelişme: Kazakistan örneği. Ege Stratejik Araştırmalar Dergisi 4(2): 20-31.
• [2] Ağır H., Kar M., Nazlıoğlu Ş (2011). Do remittances matter for financial development in the MENA region? Panel cointegration and causality analysis. Empirical Economics Letters 10.5: 449-456.
• [3] Asiedu, E (2002). On the determinants of foreign direct investment to developing countries: ıs africa different? World Development 30(1): 107-119.
• [4] Asiedu E., Lien D. (2011). Democracy, foreign direct investment and natural resources. Journal of International Economics 84(1): 99-111.
• [5] Baharumshah A.Z., Thanoon, M.A (2006). Foreign capital flows and economic growth in east Asian countries. China Economic Review 17(1): 70-83.
• [6] Balasubramanyam V.N., Salisu M., Sapsford D. (1996). Foreign direct investment and growth in EP and IS countries. The Economic Journal 106(434), 92-105.
• [7] Bengoa M., Sanchez-Robles, B (2003). Foreign direct investment, economic freedom and growth: new evidence from Latin America. European Journal of Political Economy 19(3): 529-545.
• [8] Breusch T.S., Pagan, A.R (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies 47.1: 239-253.
• [9] Burger M., Ianchovichina E., Rijkers B. (2015). Risky business: political instability and sectoral greenfield foreign direct investment in the Arab World. The World Bank Economic Review 1-26. doi:10.1093/wber/lhv030.
• [10] Busse M., Hefeker C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2): 397-415.
• [11] Chudik A., Pesaran M.H., Tosetti. E (2011). Weak and strong cross-section dependence and estimation of large panels. The Econometrics Journal 14(1), C45-C90. doi:10.1111/j.1368-423x.2010.00330.x.
• [12] Demircan, H (2003). Dünyada ve Türkiye'de yabancı sermaye yatırımları ve stratejileri. Ekonomik Araştırmalar Genel Müdürlüğü, Ankara
• [13] Dunning J.H. (2000). The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review 9(2): 163-190.
• [14] Edwards S. (1990). Capital flows, foreign direct investment, and debt-equity swaps in developing countries. No. w3497 National Bureau of Economic Research
• [15] Elkomy S., Ingham H., Read R. (2016). Economic and political determinants of the effects of FDI on growth in transition and developing countries. Thunderbird International Business Review, 58(4): 347-362.
• [16] Glass A.J., Saggi K. (2002). Intellectual property rights and foreign direct investment. Journal of International Economics 56(2): 387-410.
• [17] Göçer, İ.; Akın, T (2016). Kırılgan Beşlide Tasarruf-Yatırım Açığının Ekonomik Büyümeye Etkileri: Yeni Nesil Bir Ekonometrik Analiz. Ege Akademik Bakış Dergisi 16(2), 197-210.
• [18] Göçer, İ.; Peker, O (2014a). Yabancı doğrudan yatırımların istihdam üzerindeki etkisi: Türkiye, Çin ve Hindistan örneğinde çoklu yapısal kırılmalı eşbütünleşme analizi. Yönetim ve Ekonomi 21(1): 107-123.
• [19] Göçer İ., Peker O. (2014b). Yabancı doğrudan yatırımların verimlilik etkisi: Türkiye, Çin ve Hindistan örnekleminde karşilaştirmali çoklu yapisal kirilmali eşbütünleşme analizi. Verimlilik Dergisi 1: 7-40.
• [20] Granger C.W.J. (1988). Some recent developments in a concept of causality. Journal of Econometrics 39 (1): 199-211.
• [21] Hadri, K (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal 3(2): 148-161.
• [22] Harms P., Ursprung, H.W. (2002). Do civil and political repression really boost foreign direct investments? Economic Inquiry 40(4): 651-663.
• [23] Hoa D.T.T., Lin, J.Y. (2016). Determinants of foreign direct investment in Indochina: a holistic approach. International Journal of Business and Applied Social Science 2(1): 1-10.
• [24] Im K.S., Pesaran M.H., Shin Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115(1): 53-74.
• [25] Javorcik B.S. (2004). The composition of foreign direct investment and protection of intellectual property rights: evidence from transition economies. European Economic Review 48(1): 39-62.
• [26] Jiang W., Martek I., Hosseini M.R., Tamošaitien˙e J., Chen C. (2019). Foreign infrastructure investment in developing countries: a dynamic panel data model of political risk impacts. Technological and Economic Development of Economy, 25(2): 134-167.
• [27] Kao C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics 90(1): 1-44.
• [28] Kesternich I., Schnitzer M. (2010). Who is afraid of political risk? Multinational firms and their choice of capital structure. Journal of International Economics, 82(2): 208-218.
• [29] Kobrin S.J. (1979). Political risk: a review and reconsideration. Journal of International Business Studies 10(1): 67-80.
• [30] Kurul Z., Yalta A. (2017). Relationship between institutional factors and FDI flows in developing countries: New evidence from dynamic panel estimation. Economies, 5(2), 17.
• [31] Lankes H.P., Venables A.J. (1996). Foreign direct investment in economic transition: the changing pattern of investments. Economics of Transition 4(2): 331-347.
• [32] Levin A., Lin C.F., Chu C.S.J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics 108(1): 1-24.
• [33] Miller T., Kim, A.B. (2013). Defining economic freedom. Miller AT, Holmes KR, Feulner EJ (eds), 87-94.
• [34] Morgan Stanley (2013). FX Pulse Preparing for Volatility. Global Outlook, 01.08.2013 http://www.morganstanleyfa.com/public/projectfiles/ dce4d168-15f9-4245-9605-e37e2caf114c.pdf (05.02.2015)
• [35] Özcan B., Arı, A (2010). Doğrudan yabancı yatırımların belirleyicileri üzerine bir analiz: OECD örneği. Ekonometri ve İstatistik e-Dergisi 12: 65-88.
• [36] Pedroni, P. (2004). Panel cointegration. Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory 20(03): 597-625.
• [37] Pesaran M.H. (2004). General diagnostic tests for cross section dependence in panels. CESifo Working Papers No.1233: 255-60.
• [38] Pesaran M.H., Ullah A., Yamagata T. (2008). A bias-adjusted LM test of error cross-section independence. The Econometrics Journal 11.1: 105-127.
• [39] Quazi R. (2007). Economic freedom and foreign direct investment in East Asia. Journal of The Asia Pacific Economy 12(3): 329-344.
• [40] Rashid M., Looi X.H., Wong S.J. (2017). Political stability and FDI in the most competitive Asia Pacific countries. Journal of Financial Economic Policy 9.02 :140-155.
• [41] Rodriguez-Clare A. (1996). Multinationals, linkages, and economic development. The American Economic Review 86(4): 852-873.
• [42] Santander Trade Portal (2019). Foreign Investment. https://en.portal. santandertrade.com/establish-overseas/brazil/foreign-investment. Accessed 10.02.2019.
• [43] Schneider F., Frey B.S. (1985). Economic and political determinants of foreign direct investment. World Development 13(2): 161-175.
• [44] Seyoum B. (1996). The impact of intellectual property rights on foreign direct investment. The Columbia Journal of World Business 31(1): 50-59.
• [45] The Global Economy (2019). http://www.theglobaleconomy.com/ indicators_data_export.php. Accessed 01.03.2019.
• [46] UNCTAD. World investment report overview (2018). Reforming International Investment F-Governance. https://unctad.org/en/PublicationsLibrary/ wir2018_en.pdf. Accessed 25.02.2019

Identyfikatory

DOI

DOI: 10.24425/cejeme.2019.131539