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The Role of Foreign Direct Investment on Economic Growth in Tanzania: Empirical Evidence from Emerging Sectors
Abstract
FDI plays crucial role in stimulating development of various sectors in economy such as provision of skilled labour, employment creation, source of capital, management and technological transfer. Over the past 30 years, the share of FDI in World’s economy has been transformed from manufacturing sector to service sector thus creating various emerging sectors.The study employed time series secondary data for 22 years from 1999 to 2020, then used dickey-fuller and Philips perron tests for stationarity, Auto Regressive Distributed Lag (ARDL) bound test for co-integration, ARDL model to estimates long-run relationship lastly, diagnostic tests were applied to check validity and reliability of variables. The study revealed that FDI inflow in transport and storage sector have weak positive impact on economic growth while FDI inflow to other sectors have insignificant impact to economic growth. Thus, to combat such outcomes, the government is advised to attract more foreign investment to sectors with undesirable impacts with productive strategies to improve sectors performance on economic growth through establishment of favourable investment policies such as tax policies to avoid double taxation, capital account liberalization policies and financial institution policies to create conducive investment environment.
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This article aims to examine the dynamic relationships between foreign direct investment inflows, information and communication technologies, and economic growth in a sample of 15 Arab countries over the period 1995–2019 by employing a panel ARDL approach. The results of estimation of the panel ARDL model reveal that ICT and FDI have positive and significant effects on economic growth in the long run, and ICT indicators have also positive impact on FDI inflows in the long run in the selected sample of Arab countries. From an empirical point of view, this study may have an important contribution. Its findings could be very interesting for better future management of ICT in Arab countries. Therefore, the Arab countries should further improve information and communication technology as an important infrastructure for receiving more foreign direct investment inflows and for better economic growth.
Investment expenditure is a major component of aggregate macroeconomic variables in any economy, irrespective of the development status. This article employed relevant econometric methodology on panel data environment to analyze the effects of foreign direct investment (FDI) inflows on economic growth of 30 leading global economies during the period between 1998 and 2017. Other variables considered in the analysis were domestic credit to private sector (DCPS), gross fixed capital formation (GFCF), inflation–consumer prices index (INFPC), trade openness (TOPNESS), and youth unemployment (UEMPYT). The results showed mixed growth effects of the variables in general. Specifically, FDI exerted positive and significant effect on economic growth of the countries during the period. Therefore, this article concluded that FDI inflows enhanced economic growth and emphasized the need to foster more FDI-attracting policies as well as adequate GFCF to complement FDIs for sustainable economic growth potentials.
JEL Classification: C23, C33, C51, F21, F43, O47.
Pakistan significantly contributes to the overall economy of South Asia, but, for many years, it has been facing a severe energy crisis. Despite the robust economic growth and a sharp increase in energy demand, no deliberate efforts have been made to meet the energy demand of the country. Similar to other developing countries, foreign direct investment (FDI) plays a key role in the economic development of this country. Pakistan receives FDI from many countries in various sectors of the economy. This paper aims to highlight the present situation of the power and energy sector of Pakistan (PESP), and empirically analyze the causality among the FDI in the power and energy sector, the energy consumption, and the economic growth of Pakistan for the period 1990–2017. The Johansen co-integration and Granger causality tests were employed to find the causal relationships among the variables of interest in the short-run and the long-run. The sector-wise flow of FDI reveals that the power and energy sector of Pakistan (PESP) has comparatively received a higher amount of FDI than other sectors of the economy in recent years. Furthermore, trends of energy production and energy usage reveal a substantial gap in previous years. The results confirm a positive bi-directional short-run causal relationship between economic growth and energy consumption. The results also reveal the presence of long-run causality in the equation of energy consumption. Considering the current situation of PESP, policy-makers should formulate policies to attain the minimum debt level and discourage loan-based investment. Such policies would be helpful to control the severe energy crisis and increase economic growth.
Given the importance of FDI for the economic growth of both home and host countries, the aim of this paper is to assess the importance granted to location advantages during the development of FDI theory. We start with the earliest theoretical directions as regards FDI location issues and extend our study to describing less debated theories, but of a particular importance for this theme. In this way, we have the opportunity to emphasize the changes in FDI location determinants. We find that a direction of the FDI theories’ expansion is due to the incorporation of new variables on location, although the location advantages are barely mentioned in the first explanations regarding the international activity of the firms.
This paper employed GMM for the first time to estimate the dynamic relevance between real estate investment and the economic growth based on the panel data of 284 Chinese Prefecture cities from 1994 to 2010. We find that the positive effect of real estate investment on economic growth is stronger in short term while in long term turn to be negative. Therefore housing investment is an important factor for short-term economy fluctuations and lead to downside risk in the long term. The effect of real estate investment also rely on the regional economy development and has periodic characteristics, which is stronger in the eastern region than the midwest region and the negative enduring impact is strengthened after 2004. Furthermore the government expenditure hinder the economy growth and cutting government expenditure and curbing the wind of extravagance by the new leadership in China is proved to be proper.
The last two decades have witnessed a growth in foreign direct investments (FDI) in the real estate sector in most of the Organization for Economic Co-Operation and Development (OECD) countries. It is argued that FDI in the real estate sector may improve economic growth in recipient economies. On the other hand, property prices have increased considerably in OECD countries in recent years and some argue that FDI in real estate is one of the driving forces of high property prices in these countries. The purpose of this study is to analyze the interrelationship between FDI in the real estate sector, economic growth, and property prices while controlling for interest rate and inflation. We use observations from a set of OECD countries for the period between 1995 and 2008. The dynamic interrelationship is analyzed by applying a panel cointegration technique. Our empirical results show that FDI in real estate do not cause property price appreciations and also do not contribute to economic growth in OECD countries in the short run and the long run.
Based on the direction of the international FDI changed, from manufacturing to service industries, we should concern about the influence of the introduction of China's logistics industry FDI to the national economy. The paper sets up regression model to examine logistics FDI and GDP in two aspects of time series and growth rate, we find that the lo-gistics FDI reaches a high correlation with GDP, and logistics FDI is one of the major driving forces of economic de-velopment. Therefore, China should expand the introduction of logistics FDI, improve the quality of foreign investment, develop the positive economic growth effect of logistics FDI and promote the change of China's economic growth pat-tern to ensure the development of China's economy.
Estimating the lag length of autoregressive process for a time series is a crucial econometric exercise in most economic studies. This study attempts to provide helpfully guidelines regarding the use of lag length selection criteria in determining the autoregressive lag length. The most interesting finding of this study is that Akaike's information criterion (AIC) and final prediction error (FPE) are superior than the other criteria under study in the case of small sample (60 observations and below), in the manners that they minimize the chance of under estimation while maximizing the chance of recovering the true lag length. One immediate econometric implication of this study is that as most economic sample data can seldom be considered “large†in size, AIC and FPE are recommended for the estimation the autoregressive lag length.
In this paper, we sought to extend the theory of the location determinants of MNEs by challenging one of the fundamental assumptions underlying it, namely that location advantages are absolutes whose values are identical for different MNEs. We explicitly acknowledge the relative value of location advantages for individual MNEs and search for the firm-specific attributes affecting this variation. The empirical testing is based on an analysis of 673 financial and professional service MNEs that entered New York and London business clusters via M&As during the last two decades. The findings confirm that the value of particular location advantages varies for MNEs with different attributes, and that it is the interaction between location and firm-specific attributes, rather than each of these independently, that affects location choices. Firms' previous experience in a country, the geographic scope of their acquisition activity, and their size were found to be particularly influential attributes. Classification-JEL: F23, L10, L80, R30
The purpose of this study was to identify and examine the key foreign direct investment theories. The history and origins of FDI theories were considered, prior to dwelling in-depth on the theories themselves. FDI theories were classified under macroeconomic and microeconomic perspectives. Macroeconomic FDI theories emphasize country-specific factors, and are more aligned to trade and international economics, whereas microeconomic FDI theories are firm-specific, relate to ownership and internalisation benefits and lean towards an industrial economics, market imperfections bias. FDI theories are fairly complex to explain and apply. This paper is purely qualitative in nature, and attempted to explain the different FDI theories by providing an analyisis of the key theories used in many scholarly works**.
In this paper we present a discussion on current energy and power situation of the country, and examines the causal relationship between FDI in the energy and power sector, and economic growth in Bangladesh for the period 1972-2010. Related trend reveals a considerable gap between energy production and energy use during this period. Moreover, inflow trend of FDI was also fluctuating over the studied period. We also find that there are robust positive and unidirectional short-run causal relationships running from FDI to energy use and from energy use to GDP growth. Empirical results also confirm a causal relationship for the energy use equation in the long run. Considering the resource and technology gap and requirements for the development of the energy and power sector, FDI should be encouraged to this sector that would be imperative to the targeted GDP growth.
The objective of this paper is to reinvestigate the relationship between natural gas consumption and economic growth by including foreign direct investment, capital and trade openness in Malaysia for the period of 1971-2012. The structural break unit root test is employed to investigate the stationary properties of the series. We have applied combined cointegration test to examine the relationship between the variables in the long run. For robustness sake, the ARDL bounds testing method is also employed to test for a possible long run relationship in the presence of structural breaks. We note the validity of cointegration between the variables. Natural gas consumption, foreign direct investment, capital formation and trade openness have positive influence on economic growth in Malaysia. The results support the presence of feedback hypothesis between natural gas consumption and economic growth, foreign direct investment and economic growth, and natural gas consumption and foreign direct investment. The policy implications of these results are provided.
This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political autonomy of the central banks in emerging market and developing countries. Our analysis confirms that greater CBA has on average helped to maintain low inflation levels. The paper identifies four broad principles of CBA that have been shared by the majority of countries. Significant differences exist in the area of banking supervision where many central banks have retained a key role. Finally, we discuss the sequencing of reforms to separate the conduct of monetary and fiscal policies. IMF Staff Papers (2009) 56, 263–296. doi:10.1057/imfsp.2008.25; published online 23 September 2008
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