Foreign direct investment, anti‐money laundering regulations and economic growth

Ofoeda, Isaac; Agbloyor, Elikplimi Komla; Abor, Joshua Yindenaba; Achampong, Kofi Osei

doi:10.1002/jid.3582

Cited by 9 publications

(19 citation statements)

References 68 publications

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“…This finding is corroborated by the study of Djankov et al (2006), who provided evidence that robust business regulations stimulate the growth of countries. Again, Ofoeda et al (2022a) find a significant positive impact of AML regulations on economic growth across the globe. However, our study shows that AML regulations somewhat dampen the growth of developed countries.…”

Section: Financialmentioning

confidence: 78%

“…It also creates economic inefficiencies that raise the cost of conducting business and make the output market uncompetitive (Loayza et al, 2019). According to Ofoeda et al (2022a), effective AML regulation creates competitive output markets resulting in the reallocation of resources from less productive firms (front companies) to productive ones. Also, AML regulations eliminate inefficient firms from the marketplace to promote growth.…”

Section: Review Of the Literaturementioning

confidence: 99%

“…Therefore, we posit that AML regulations impact how financial development influences growth. Empirically, using a panel threshold regression technique, Ofoeda et al (2022a) examined the impact of AML regulations on the foreign direct investment-economic growth nexus for 165 countries across the globe. Their study found that the growth-enhancing impact of FDI is more pronounced at higher levels of AML regulations.…”

Section: Review Of the Literaturementioning

confidence: 99%

“…In line with theoretical prescriptions and previous empirical studies (see Ofoeda et al, 2022a;Sirag et al, 2018;Slesman et al, 2019), we specify the following model:…”

Section: Empirical Model Specificationmentioning

confidence: 99%

“…Further, Slesman et al (2019) investigated how political institutions moderate the relationship between finance and growth in emerging and developing countries. Additionally, Ofoeda et al (2022a) examined the moderating rule of AML regulations in the relationship between foreign direct investment and economic growth. Despite the proliferation of literature on the financial development-economic growth relationship and the impact of other intermediating factors in this connection, we are unaware of any empirical attempt to assess how AML regulations impact the finance-growth nexus.…”

Section: Introductionmentioning

confidence: 99%

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Financial sector development, anti-money laundering regulations and economic growth

Ofoeda

Agbloyor

Abor

2022

IJOEM

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PurposeThis study examines the influence of anti-money laundering (AML) regulations on the financial development-economic growth nexus around the world.Design/methodology/approachThe study uses data from 165 countries spanning continents, income levels, and regulatory regimes from 2012 to 2018. The Prais–Winsten (1954) and Hansen (2000) panel threshold estimation approaches were used to assess the study's hypothesized relationships.FindingsFinancial development, according to the research, generally stimulates economic growth. However, the authors find evidence of AML regulations' threshold effect on the finance-growth connection, with the impact of finance on growth being positive below the threshold value. Above the threshold, however, the authors observe a negative influence. Further, the authors find that AML regulations have a considerable detrimental impact on the finance-growth nexus over the threshold for developed countries. However, the authors find a positive but insignificant effect of finance on growth below the AML regulations threshold for African countries, while finance positively impacts growth above the AML regulations threshold.Practical implicationsThe findings of the study imply that countries must make conscious efforts to combat the incidence of money laundering by establishing policies to improve financial transparency and standards, promoting public sector transparency and accountability, reducing legal and political risk, and combating bribery and corruption.Originality/valueThis study contributes to the literature as it is the first attempt to examine the moderating role of AML regulations in the finance-growth nexus. Also, the study examines the threshold effect of how AML regulations impact the finance-growth nexus.

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Section: Financialmentioning

confidence: 78%

Section: Review Of the Literaturementioning

confidence: 99%

Section: Review Of the Literaturementioning

confidence: 99%

“…In line with theoretical prescriptions and previous empirical studies (see Ofoeda et al, 2022a;Sirag et al, 2018;Slesman et al, 2019), we specify the following model:…”

Section: Empirical Model Specificationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Financial sector development, anti-money laundering regulations and economic growth

Ofoeda

Agbloyor

Abor

2022

IJOEM

Self Cite

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Benefit or burden? An exploratory analysis of the impact of anti‐money laundering regulations on sustainable development in developing economies

Ajide,

Ojeyinka

2023

Sustainable Development

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Over the years, efforts have been put in place to address money laundering activities including financial crime and illicit funding controls. These efforts have been recognized to promote financial integrity and effective governance systems. They have been further adjudged by the United Nations' sustainable development (Goal‐16) with a major concern to achieve peaceful, just and inclusive development. Previous studies reveal that money laundering activities have major implications for economic growth. However, little is known about the main implications of anti‐money laundering (AML) regulations on sustainable development. On this note, this study contributes to the ongoing debate by investigating the relationship between AML regulations and sustainable development in 72 developing economies, consisting 29 upper middle income, 33 low middle income and 10 low income countries. Using instrumental variable generalized method of moment (IV‐GMM), panel quantile estimation technique and dynamic panel threshold analysis, the findings are as follows. First, AML regulations promote sustainable development. Second, the panel quantile regression reveals that countries with moderate AML regulations attain higher sustainable development than those with excessive regulations. Further results on regional analysis show that AML regulations are more effective in Latin America, South Asia, Europe & Central Asia and Middle East & North Africa than in Sub‐Saharan Africa and East Asia & Pacific. These results are robust and stable after conducting a number of robustness analyses. The study suggests that effective AML regulations should be moderate and well‐implemented to further improve economic, social and environmental sustainability in developing countries.

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Estimating the impact of economic globalization on economic growth of Ghana: Wavelet coherence and ARDL analysis

Baidoo,

Tetteh,

Boateng

et al. 2023

Research in Globalization

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Foreign direct investment, anti‐money laundering regulations and economic growth

Cited by 9 publications

References 68 publications

Financial sector development, anti-money laundering regulations and economic growth

Financial sector development, anti-money laundering regulations and economic growth

Benefit or burden? An exploratory analysis of the impact of anti‐money laundering regulations on sustainable development in developing economies

Estimating the impact of economic globalization on economic growth of Ghana: Wavelet coherence and ARDL analysis

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