The aim of this paper is twofold. First, it is to answer the question of whether Russia is successful in attracting foreign direct investment (FDI). Second, it is to identify partner countries that “overinvest” and “underinvest” in the Russian economy. We do this by calculating potential FDI inflows to Russia and comparing them with actual values. This research is associated with the empirical estimation of factors explaining FDI flows between countries. The methodological foundation used for the research is the gravity model of foreign direct investment. In discussing the pros and cons of different econometric methods of the estimation gravity equation, we conclude that the Poisson pseudo maximum likelihood method with instrumental variables (IV PPML) is one of the best options in our case. Using a database covering about 70% of FDI flows for the period of 2001-2011, we discover the following factors that explain the variance of bilateral FDI flows in the world economy: GDP value of investing country, GDP value of recipient country, distance between countries, remoteness of investor country, remoteness of recipient country, level of institutions development in host country, wage level in host country, membership of two countries in a regional economic union, common official language, common border and colonial relationships between countries in the past. The potential values of FDI inflows are calculated using coefficients of regressors from the econometric model. We discover that the Russian economy performs very well in attracting FDI: the actual FDI inflows exceed potential values by 1.72 times. Large developed countries (France, Germany, UK, Italy) overinvest in the Russian economy, while smaller and less developed countries (Czech Republic, Belarus, Denmark, Ukraine) underinvest in Russia. Countries of Southeast Asia (China, South Korea, Japan) also underinvest in the Russian economy.
1 This paper empirically analyses the determinants of foreign direct investment inflows into the Russian regions. This problem has become highly relevant for the necessary modernization of the Russian economy after the recent economic slowdown and sharp decrease in budget revenues. The authors model foreign direct investment flows with the use of the gravity approach according to which investment flows are positively correlated with the size of the investor's country as well as the size of the recipient region and are negatively correlated with the distance between investor and recipient. The empirical analysis is based on a constructed database consisting of the foreign direct investment flows from 179 investor countries into 78 Russian regions for the period 2006-2013. The authors apply the Poisson Pseudo Maximum Likelihood method and identify the following factors determining foreign direct investment inflows into the Russian economy: the gross domestic product of the investor's country, the gross domestic product per capita in the recipient region, the distance from the investor to Moscow, the openness of the region, the economic situation in the region
Over the last few years, empirical evidence has revealed that technological innovation plays a significant impact in reducing energy consumption and mitigation of carbon emission. But to achieve technological progress toward energy consumption sustainability, depend on several other factors. To this end, this study examines the role of outward foreign direct investment and international trade openness in innovation-energy nexus for 24 OECD countries for the period 1996-2015. To address econometric issues such as cross-sectional dependence, endogeneity, heterogeneity in the panel estimation process, this study employs the Cross-Sectionally Augmented autoregressive Distributed Lags (CS-ARDL), Augmented Mean Group estimator (AMG), and the System Generalized Methods of Moments (SYS-GMM) techniques. Finding reveals that the moderating effects of outward FDI and trade openness in the indirect relationship between technological innovation and energy demand exhibits an inverted U-shape curve. Specifically, this study finds that the impact of technological innovation on energy consumption via reverse technology spillover effect from outward FDI reinforces OECD countries toward energy-saving environmental sustainability both in the short-run and long-run. Furthermore, the joint impact of technological innovation and trade openness on energy demand is negative and statistically significant in the short and long run. This strengthens the efficiency of technologically innovative capabilities of OECD countries to effectively reduce energy consumption. These results are robust to different specifications and consistent across the various estimators, with sets of policy implication discussed.
Numerous studies have examined whether the interrelationship between outward foreign direct investment (OFDI) and international trade are complementary or substitutive. However, one major concern of policymakers is the possibility of OFDI precipitating de-industrialization and jobs losses of domestic economy. This study critically addresses these views by examining the interaction between OFDI and disaggregate international trade based on world bank country income classification which includes, the low income, lower-middle income, upper-middle income, and High income for a panel of 179 countries for the period of 2003 -2019. Based on dynamic panel data model for system-GMM, empirical findings show that OFDI has negative and significant effects on exports and imports of low-income countries, an indication of a substitutional relationship. Regarding the effects of exports on OFDI, and with exception of low-income countries, we found a positive and significant relationship for in all income cluster, an indication of a complementarity relationship. This shows that home country's export is an important facilitator of OFDI. Overall, our empirical results support complementary effects on the dynamic interplay between OFDI and disaggregate international trade, suggesting a greater competitiveness in foreign markets as well as an increase in commercial integration.
The purpose of the article is to study the influence of digitalization factors on the investment activity of the largest cities of the Republic of Kazakhstan. During the research, the methods of correlation analysis, indexing, comparison, generalization, and synthesis were applied. The scientific novelty of the study lies in assessing the impact of digitalization on the investment potential of cities. The authors selected and analyzed indicators for assessing the level of digitalization of the megalopolises of the Republic of Kazakhstan; the methodology was modified and the level of digitalization of cities of republican significance of the Republic of Kazakhstan was assessed, conclusions were drawn about the current and future potential of digitalization as a factor in increasing the investment attractiveness of these cities. General conclusions were made that for Almaty and Nur-Sultan, digitalization is already a good factor in attracting investment, while Shymkent needs enhanced development of digital infrastructure for it to become a factor in increasing investment activity in the city. The research results can be used both in the formation of long-term plans for the development of these cities, and as a basis for further research in this direction. Prospects for further research on this topic - in increasing the available reliable and relevant data through the collection of official statistics, expanding the range of digitalization factors affecting investment activity and the use of more comprehensive assessment methods that will determine not only the closeness of the relationship, but also the exact value of the effects of factors each other.
The paper is devoted to the empirical estimation of the effects of foreign direct investment (FDI) on domestic investment in the Russian economy. The results suggest that there are crowding-out effects of FDI on the Russian economy. Using the firm-level database for 2008—2017, we analyze the presence of foreign companies in the Russian economy on the region, industry and industry in region levels. On the regional level the statistically significant effects of crowding out domestic investment are identified for state-owned, large as well as less effective companies. On the industry level the negative effects of crowding out are observed in case when FDI share in the industry exceeds 25. Estimating the effect of FDI presence on the industry in the region level, we reveal crowding out effects mainly for private and more effective national companies. Analyzing the effects in case of different levels of FDI in the economy, we do not find support for the hypothesis of adaptation of national companies for foreign companies’ presence in the economy. The paper suggests that the government policy in FDI regulation should focus on mitigation of the effects of pushing national companies off the market, and also creating conditions for cooperation of foreign and domestic companies.
Any government strives to stimulate export activity in high-tech sectors of its economy. Surprisingly, there are few empirical papers on the determinants of high-tech export to date. This study analyses the economies of Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) due to the differences they experienced in the transition period. To this end, we used the Balassa index, which is based on the concept of revealed comparative advantages. The research examines 73 groups of products from the automotive, chemical, mechanical engineering, electronics and electrical engineering industries in 27 countries from 1995 to 2018. Principal component analysis helped generate an indicator of comparative advantage of hightech industries for each country in each year. It is revealed that CEE countries, as well as the Baltic countries, have achieved significant success in the development of high-tech sectors of the economy, while the CIS countries have shown practically no progress in this direction. The article tests hypotheses on the impact of resources, foreign trade, macroeconomy and innovation on export activity in the country. The following factors stimulate the export growth in high-tech industries of the studied countries: level of wages and resource prices, openness of the economy to foreign trade; tax rate; unemployment rate; quality of human capital. We did not find empirical evidence of the positive impact of inflation, inflows of direct foreign investment, and the level of research and development (R&D) costs on the volume of high-tech export of the examined economies.
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