How government expenditure and trade openness affect foreign direct investment: Evidence from dynamic panel estimations
Ngày xuất bản:
25/11/2024
Ngày xuất bản Online:
25/11/2024
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Tóm tắt
The main objective of this study is to examine the effects of government expenditure and trade openness on foreign direct investments. Our sample includes 992 annual observations from 32 high and middle-income countries from 1990 to 2020. We employ the dynamic system Generalized Method of Moments to overcome heteroskedasticity and endogeneity issues. Our findings suggest that trade openness and government expenditures positively affect FDI inflows. The study recommends that the implementation of reasonable macroeconomic policy, along with the planning of investment strategies and some government interventions, will improve the efficiency of receiving foreign investment flows into the country.
Abstract
The main objective of this study is to examine the effects of government expenditure and trade openness on foreign direct investments. Our sample includes 992 annual observations from 32 high and middle-income countries from 1990 to 2020. We employ the dynamic system Generalized Method of Moments to overcome heteroskedasticity and endogeneity issues. Our findings suggest that trade openness and government expenditures positively affect FDI inflows. The study recommends that the implementation of reasonable macroeconomic policy, along with the planning of investment strategies and some government interventions, will improve the efficiency of receiving foreign investment flows into the country.
Từ khóa
Foreign direct investment; Government expenditure; GMM; High-income nations; Middle-income nations; Trade openness
Chi tiết bài viết
Tài liệu tham khảo
Abdul Hadi, A. R., Zafar, S., Iqbal, T., Zafar, Z., & Iqbal Hussain, H. (2018). Analyzing sectorial level determinants of inward foreign direct investment (FDI) in ASEAN. Polish Journal of Management Studies, 17(2), 7-17. https://doi.org/10.17512/pjms.2018.17.2.01
Anyanwu, J. C., and Yameogo, N. D. 2015. What drives foreign direct investments into West Africa? An empirical investigation. African Development Review, 27(3), 199-215. https://doi.org/10.1111/1467-8268.12141
Aristyania, S. R., and Wibowob, W. 2020. Macro and Institutional Variables with Foreign Direct Investment in Emerging and Developing Countries in Asia. International Journal of Innovation, Creativity and Change, 13(8). https://ijicc.net/images/vol_13/Iss_8/13897_Aristyani_2020_E_R.pdf
Asiedu, E. 2002. On the determinants of foreign direct investment to developing countries: is Africa different?. World development, 30(1), 107-119. https://doi.org/10.1016/S0305-750X(01)00100-0
Asiedu, E., and Lien, D. 2004. Capital controls and foreign direct investment. World development, 32(3), 479-490. https://doi.org/10.1016/j.worlddev.2003.06.016
Asongu, S., Akpan, U. S., and Isihak, S. R. 2018. Determinants of foreign direct investment in fast-growing economies: evidence from the BRICS and MINT countries. Financial Innovation, 4(1), 1-17. https://doi.org/10.1186/s40854-018-0114-0
Bedi, A. S., and Cielik, A. 2002. Wages and wage growth in Poland: The role of foreign direct investment. Economics of Transition, 10(1): 1-27. https://doi.org/10.1111/1468-0351.00101
Benedicta, O. 2017. Effect of budget deficit on fiscal administration in Nigeria: 1990-2019 in focus. International journal of economic perspectives, 11(1): 100-114. http://ijeponline.org/index.php/journal/article/view/47
Boateng, A., Hua, X., Nisar, S., and Wu, J. (2015). Examining the determinants of inward FDI: Evidence from Norway. Economic Modelling, 47, 118-127. https://doi.org/10.1016/j.econmod.2015.02.018
Djulius, H. 2017. Energy use, trade openness, and exchange rate impact on foreign direct investment in Indonesia. International Journal of Energy Economics and Policy, 7(5), 166-170. http://repository.unpas.ac.id/id/eprint/49765
Dunning, J. H. (1991). The eclectic paradigm of international production. In C. Pitelis, R. Sugden (Eds.), The Nature of the Transnational Firm (pp. 121-141). Psychology Press. https://books.google.com.vn/books?id=WnCjzSACUEYC&lr=&source=gbs_navlinks_s
Dunning, J. H., & Lundan, S. M. (2008). Multinational enterprises and the global economy (2nd ed.). UK: Edward Elgar Publishing.
Duong, K. D., Nguyen, S. D., Phan, P. T. T., & Luong, L. K. (2022). How foreign direct investment, trade openness, and productivity affect economic growth: evidence from 90 middle-income countries. Scientific Papers Of The University Of Pardubice. Series D, Faculty of Economics & Administration, 30(3). https://doi.org/10.46585/sp30031615
Erdogan, M., and Unver, M. 2015. Determinants of foreign direct investments: Dynamic panel data evidence. International Journal of Economics and Finance, 7(5), 82. http://dx.doi.org/10.5539/ijef.v7n5p82.
Groh, A. P., & Wich, M. (2012). Emerging economies’ attraction of foreign direct investment. Emerging Markets Review, 13(2), 210-229. https://doi.org/10.1016/j.ememar.2012.03.005
Hashmi, S. H., Hongzhong, F., and Ullah, A. 2020. Effect of political regime, trade liberalization and domestic investment on FDI inflows in Pakistan: New evidence using ARDL bounds testing procedure. International Journal of Information, Business and Management, 12(1), 276-299. http://ijibm.site666.com/IJIBM_Vol12No1_Feb2020.pdf#page=280
Ibrahim, M., & Alagidede, P. (2018). Nonlinearities in financial development–economic growth nexus: Evidence from sub-Saharan Africa. Research in International Business and Finance, 46, 95-104. https://doi.org/10.1016/j.ribaf.2017.11.001
Iwegbunam, I. A., and Robinson, Z. 2019. Economic growth models and government expenditure in South Africa: A disaggregated impact analysis. International Journal of Economics and Finance Studies, 11(1), 33-48. https://doi.org/10.34109/ijefs.201911103
Jadhav, P. 2012. Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factor. Procedia - Social and Behavioral Sciences, 37, 5-14. https://doi.org/10.1016/j.sbspro.2012.03.270
Khan, R. E. A., & Adnan Hye, Q. M. (2014). Foreign direct investment and liberalization policies in Pakistan: An empirical analysis. Cogent Economics & Finance, 2(1), 944667. https://doi.org/10.1080/23322039.2014.944667
Kueh, J. S. H., C.H. Puah, and C.M. Wong. 2009. Bounds estimation for trade openness and government expenditure nexus of ASEAN-4 Countries. Economics, Management and Financial Markets, 4(1), 103-112. https://www.ceeol.com/search/article-detail?id=252236
Kumari, R., and Sharma, A. K. 2017. Determinants of foreign direct investment in developing countries: a panel data study. International Journal of Emerging Markets, 12(4), 658-682. https://doi.org/10.1108/IJoEM-10-2014-0169
Lawson, J., Du, K., and Bentum-Micah, G. 2019. The Impact of Macroeconomic Variables, Investment Incentives and Government Agreements on FDI Inflows in Ghana. Journal of Economics and Business, 2(3), 1039-1056. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3461108
Le, A. N. N., Pham, H., Pham, D. T. N., & Duong, K. D. (2023). Political stability and foreign direct investment inflows in 25 Asia-Pacific countries: the moderating role of trade openness. Humanities and Social Sciences Communications, 10(1), 1-9. https://doi.org/10.1057/s41599-023-02075-1
Lehnert, K., Benmamoun, M., and Zhao, H. 2013. FDI inflow and human development: analysis of FDI's impact on host countries' social welfare and infrastructure. Thunderbird International Business Review, 55(3), 285-298. https://doi.org/10.1002/tie.21544
Liargovas, P. G., and Skandalis, K. S. 2012. Foreign direct investment and trade openness: The case of developing economies. Social indicators research, 106(2), 323-331. https://doi.org/10.1007/s11205-011-9806-9
Lindelwa Makoni, P. 2018. “FDI and Trade Openness: The Case of Emerging African Economies. Journal of Accounting and Management, 8(2), 141-152. https://hrcak.srce.hr/216262
Meidayati, A. W. 2017. Impact of telecommunication infrastructure, market size, trade openness and labour force on foreign direct investment in ASEAN. Journal of Developing Economies, 2(2), 76-86. https://www.e-journal.unair.ac.id/JDE/article/view/6677
Mugableh, M. I. 2015. “Time series analysis of inward foreign direct investment function in Malaysia. Procedia-Social and Behavioral Sciences, 172, 679-685. https://doi.org/10.1016/j.sbspro.2015.01.419.
Narula, R., & Dunning, J. H. (2010). Multinational enterprises, development and globalization: some clarifications and a research agenda. Oxford Development Studies, 38(3), 263-287. https://doi.org/10.1080/13600818.2010.505684
Oke, B. O., Ezike, J. E., and Ojogbo, S. O. 2012. Locational determinants of foreign direct investments in Nigeria. International Business Research, 5(4), 103-111. http://dx.doi.org/10.5539/ibr.v5n4p103
Othman, N., Yusop, Z., Andaman, G., and Ismail, M. M. 2018. Impact of Government spending on FDI inflows: The case of ASEAN-5, China and India. International Journal of Business and society, 19(2), 401-414. http://www.ijbs.unimas.my/images/repository/pdf/Vol19-no2-paper10.pdf
Pradhan, R. P., Arvin, M. B., Nair, M., Mittal, J., Norman, N. R. 2017. Telecommunications infrastructure and usage and the FDI–growth nexus: evidence from Asian-21 countries. Information Technology for Development, 23(2), 235-260. https://doi.org/10.1080/02681102.2016.1217822
Ranjan, V., and Agrawal, G. 2011. FDI inflow determinants in BRIC countries: A panel data analysis. International Business Research, 4(4), 255. https://doi.org/10.5539/ibr.v4n4p255
Rogmans, T., and Ebbers, H. 2013. The determinants of foreign direct investment in the Middle East North Africa region. International Journal of Emerging Markets, 8(3), 240-257. https://doi.org/10.1108/17468801311330310
Saimul, S. 2020. Relationship Between Government Spending and Private Investment in Indonesia. International Journal of Advanced Science and Technology, 29(4), 5248-5258. http://repository.lppm.unila.ac.id/id/eprint/23162.
Saini, N., and Singhania, M. 2018. Determinants of FDI in developed and developing countries: a quantitative analysis using GMM. Journal of Economic Studies, 45(2), 348-382. https://doi.org/10.1108/JES-07-2016-0138
Shah, M. H., and Khan, Y. 2016. Trade liberalization and FDI inflows in emerging economies. Business & Economic Review, 8(1), 35-52. https://ssrn.com/abstract=2851548
Tahmad, A. M. I., and Adow, A. H. 2018. The impact of trade openness on foreign direct investment in Sudan by sector in the 1990-2017 period: an empirical analysis. Economic annals-XXI, 172(7-8), 14-22. https://www.ceeol.com/search/article-detail?id=731883
Tran, V. H., Lu, N. P., Le, N. T. P., & Duong, K. D. (2023). How Do Foreign Direct Investment and Economic Growth Affect Environmental Degradation? Evidence from 47 Middle-Income Countries. Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration 2023, 31(1).
Ullah, I., and M. A. Khan. 2017. Institutional Quality and foreign direct investment inflows: evidence from Asian countries. Journal of Economic Studies, 44(6), 1030-1050. https://doi.org/10.1108/JES-10-2016-0215
Van Bon, N. 2015. Effects of institutional quality on FDI in provinces of Vietnam: Empirical evidence based on differenced panel GMM. Journal of Economic Development, 22(3), 26-45. http://doi.org/10.24311/jed/2015.22.3.04
Vijaya, R. M., and Kaltani, L. 2007. Foreign direct investment and wages: a bargaining power approach. Journal of World-Systems Research, 13(1), 83-95. https://doi.org/10.5195/jwsr.2007.361
Vijayakumar, N., Sridharan, P., and Rao, K. C. S. 2010. Determinants of FDI in BRICS Countries: A panel analysis. International Journal of Business Science & Applied Management, 5(3), 1-13. https://ssrn.com/abstract=2284678
Wickramarachchi, V. 2019. Determinants of Foreign Direct Investment (FDI) in Developing Countries: The Case of Sri Lanka. International Journal of Business and Social Science, 10(9). https://doi.org/10.30845/ijbss.v10n9p10
Anyanwu, J. C., and Yameogo, N. D. 2015. What drives foreign direct investments into West Africa? An empirical investigation. African Development Review, 27(3), 199-215. https://doi.org/10.1111/1467-8268.12141
Aristyania, S. R., and Wibowob, W. 2020. Macro and Institutional Variables with Foreign Direct Investment in Emerging and Developing Countries in Asia. International Journal of Innovation, Creativity and Change, 13(8). https://ijicc.net/images/vol_13/Iss_8/13897_Aristyani_2020_E_R.pdf
Asiedu, E. 2002. On the determinants of foreign direct investment to developing countries: is Africa different?. World development, 30(1), 107-119. https://doi.org/10.1016/S0305-750X(01)00100-0
Asiedu, E., and Lien, D. 2004. Capital controls and foreign direct investment. World development, 32(3), 479-490. https://doi.org/10.1016/j.worlddev.2003.06.016
Asongu, S., Akpan, U. S., and Isihak, S. R. 2018. Determinants of foreign direct investment in fast-growing economies: evidence from the BRICS and MINT countries. Financial Innovation, 4(1), 1-17. https://doi.org/10.1186/s40854-018-0114-0
Bedi, A. S., and Cielik, A. 2002. Wages and wage growth in Poland: The role of foreign direct investment. Economics of Transition, 10(1): 1-27. https://doi.org/10.1111/1468-0351.00101
Benedicta, O. 2017. Effect of budget deficit on fiscal administration in Nigeria: 1990-2019 in focus. International journal of economic perspectives, 11(1): 100-114. http://ijeponline.org/index.php/journal/article/view/47
Boateng, A., Hua, X., Nisar, S., and Wu, J. (2015). Examining the determinants of inward FDI: Evidence from Norway. Economic Modelling, 47, 118-127. https://doi.org/10.1016/j.econmod.2015.02.018
Djulius, H. 2017. Energy use, trade openness, and exchange rate impact on foreign direct investment in Indonesia. International Journal of Energy Economics and Policy, 7(5), 166-170. http://repository.unpas.ac.id/id/eprint/49765
Dunning, J. H. (1991). The eclectic paradigm of international production. In C. Pitelis, R. Sugden (Eds.), The Nature of the Transnational Firm (pp. 121-141). Psychology Press. https://books.google.com.vn/books?id=WnCjzSACUEYC&lr=&source=gbs_navlinks_s
Dunning, J. H., & Lundan, S. M. (2008). Multinational enterprises and the global economy (2nd ed.). UK: Edward Elgar Publishing.
Duong, K. D., Nguyen, S. D., Phan, P. T. T., & Luong, L. K. (2022). How foreign direct investment, trade openness, and productivity affect economic growth: evidence from 90 middle-income countries. Scientific Papers Of The University Of Pardubice. Series D, Faculty of Economics & Administration, 30(3). https://doi.org/10.46585/sp30031615
Erdogan, M., and Unver, M. 2015. Determinants of foreign direct investments: Dynamic panel data evidence. International Journal of Economics and Finance, 7(5), 82. http://dx.doi.org/10.5539/ijef.v7n5p82.
Groh, A. P., & Wich, M. (2012). Emerging economies’ attraction of foreign direct investment. Emerging Markets Review, 13(2), 210-229. https://doi.org/10.1016/j.ememar.2012.03.005
Hashmi, S. H., Hongzhong, F., and Ullah, A. 2020. Effect of political regime, trade liberalization and domestic investment on FDI inflows in Pakistan: New evidence using ARDL bounds testing procedure. International Journal of Information, Business and Management, 12(1), 276-299. http://ijibm.site666.com/IJIBM_Vol12No1_Feb2020.pdf#page=280
Ibrahim, M., & Alagidede, P. (2018). Nonlinearities in financial development–economic growth nexus: Evidence from sub-Saharan Africa. Research in International Business and Finance, 46, 95-104. https://doi.org/10.1016/j.ribaf.2017.11.001
Iwegbunam, I. A., and Robinson, Z. 2019. Economic growth models and government expenditure in South Africa: A disaggregated impact analysis. International Journal of Economics and Finance Studies, 11(1), 33-48. https://doi.org/10.34109/ijefs.201911103
Jadhav, P. 2012. Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factor. Procedia - Social and Behavioral Sciences, 37, 5-14. https://doi.org/10.1016/j.sbspro.2012.03.270
Khan, R. E. A., & Adnan Hye, Q. M. (2014). Foreign direct investment and liberalization policies in Pakistan: An empirical analysis. Cogent Economics & Finance, 2(1), 944667. https://doi.org/10.1080/23322039.2014.944667
Kueh, J. S. H., C.H. Puah, and C.M. Wong. 2009. Bounds estimation for trade openness and government expenditure nexus of ASEAN-4 Countries. Economics, Management and Financial Markets, 4(1), 103-112. https://www.ceeol.com/search/article-detail?id=252236
Kumari, R., and Sharma, A. K. 2017. Determinants of foreign direct investment in developing countries: a panel data study. International Journal of Emerging Markets, 12(4), 658-682. https://doi.org/10.1108/IJoEM-10-2014-0169
Lawson, J., Du, K., and Bentum-Micah, G. 2019. The Impact of Macroeconomic Variables, Investment Incentives and Government Agreements on FDI Inflows in Ghana. Journal of Economics and Business, 2(3), 1039-1056. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3461108
Le, A. N. N., Pham, H., Pham, D. T. N., & Duong, K. D. (2023). Political stability and foreign direct investment inflows in 25 Asia-Pacific countries: the moderating role of trade openness. Humanities and Social Sciences Communications, 10(1), 1-9. https://doi.org/10.1057/s41599-023-02075-1
Lehnert, K., Benmamoun, M., and Zhao, H. 2013. FDI inflow and human development: analysis of FDI's impact on host countries' social welfare and infrastructure. Thunderbird International Business Review, 55(3), 285-298. https://doi.org/10.1002/tie.21544
Liargovas, P. G., and Skandalis, K. S. 2012. Foreign direct investment and trade openness: The case of developing economies. Social indicators research, 106(2), 323-331. https://doi.org/10.1007/s11205-011-9806-9
Lindelwa Makoni, P. 2018. “FDI and Trade Openness: The Case of Emerging African Economies. Journal of Accounting and Management, 8(2), 141-152. https://hrcak.srce.hr/216262
Meidayati, A. W. 2017. Impact of telecommunication infrastructure, market size, trade openness and labour force on foreign direct investment in ASEAN. Journal of Developing Economies, 2(2), 76-86. https://www.e-journal.unair.ac.id/JDE/article/view/6677
Mugableh, M. I. 2015. “Time series analysis of inward foreign direct investment function in Malaysia. Procedia-Social and Behavioral Sciences, 172, 679-685. https://doi.org/10.1016/j.sbspro.2015.01.419.
Narula, R., & Dunning, J. H. (2010). Multinational enterprises, development and globalization: some clarifications and a research agenda. Oxford Development Studies, 38(3), 263-287. https://doi.org/10.1080/13600818.2010.505684
Oke, B. O., Ezike, J. E., and Ojogbo, S. O. 2012. Locational determinants of foreign direct investments in Nigeria. International Business Research, 5(4), 103-111. http://dx.doi.org/10.5539/ibr.v5n4p103
Othman, N., Yusop, Z., Andaman, G., and Ismail, M. M. 2018. Impact of Government spending on FDI inflows: The case of ASEAN-5, China and India. International Journal of Business and society, 19(2), 401-414. http://www.ijbs.unimas.my/images/repository/pdf/Vol19-no2-paper10.pdf
Pradhan, R. P., Arvin, M. B., Nair, M., Mittal, J., Norman, N. R. 2017. Telecommunications infrastructure and usage and the FDI–growth nexus: evidence from Asian-21 countries. Information Technology for Development, 23(2), 235-260. https://doi.org/10.1080/02681102.2016.1217822
Ranjan, V., and Agrawal, G. 2011. FDI inflow determinants in BRIC countries: A panel data analysis. International Business Research, 4(4), 255. https://doi.org/10.5539/ibr.v4n4p255
Rogmans, T., and Ebbers, H. 2013. The determinants of foreign direct investment in the Middle East North Africa region. International Journal of Emerging Markets, 8(3), 240-257. https://doi.org/10.1108/17468801311330310
Saimul, S. 2020. Relationship Between Government Spending and Private Investment in Indonesia. International Journal of Advanced Science and Technology, 29(4), 5248-5258. http://repository.lppm.unila.ac.id/id/eprint/23162.
Saini, N., and Singhania, M. 2018. Determinants of FDI in developed and developing countries: a quantitative analysis using GMM. Journal of Economic Studies, 45(2), 348-382. https://doi.org/10.1108/JES-07-2016-0138
Shah, M. H., and Khan, Y. 2016. Trade liberalization and FDI inflows in emerging economies. Business & Economic Review, 8(1), 35-52. https://ssrn.com/abstract=2851548
Tahmad, A. M. I., and Adow, A. H. 2018. The impact of trade openness on foreign direct investment in Sudan by sector in the 1990-2017 period: an empirical analysis. Economic annals-XXI, 172(7-8), 14-22. https://www.ceeol.com/search/article-detail?id=731883
Tran, V. H., Lu, N. P., Le, N. T. P., & Duong, K. D. (2023). How Do Foreign Direct Investment and Economic Growth Affect Environmental Degradation? Evidence from 47 Middle-Income Countries. Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration 2023, 31(1).
Ullah, I., and M. A. Khan. 2017. Institutional Quality and foreign direct investment inflows: evidence from Asian countries. Journal of Economic Studies, 44(6), 1030-1050. https://doi.org/10.1108/JES-10-2016-0215
Van Bon, N. 2015. Effects of institutional quality on FDI in provinces of Vietnam: Empirical evidence based on differenced panel GMM. Journal of Economic Development, 22(3), 26-45. http://doi.org/10.24311/jed/2015.22.3.04
Vijaya, R. M., and Kaltani, L. 2007. Foreign direct investment and wages: a bargaining power approach. Journal of World-Systems Research, 13(1), 83-95. https://doi.org/10.5195/jwsr.2007.361
Vijayakumar, N., Sridharan, P., and Rao, K. C. S. 2010. Determinants of FDI in BRICS Countries: A panel analysis. International Journal of Business Science & Applied Management, 5(3), 1-13. https://ssrn.com/abstract=2284678
Wickramarachchi, V. 2019. Determinants of Foreign Direct Investment (FDI) in Developing Countries: The Case of Sri Lanka. International Journal of Business and Social Science, 10(9). https://doi.org/10.30845/ijbss.v10n9p10
Trích dẫn bài báo
Tuan, P. N., Phuong, P. T. T., & Khoa, D. D. (2024). How government expenditure and trade openness affect foreign direct investment: Evidence from dynamic panel estimations. Tạp chí Nghiên cứu Tài chính-Marketing, 15(8), 32-46. https://doi.org/10.52932/jfm.v15i8.503
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