Impacts of FDI liberalization on investment inflows

Abstract

Developing economies often impose restrictions on foreign direct investment (FDI). In recent years many developing economies liberalize external trade as well as FDI inflows. The economists have neglected the importance of government policies on economic performance until recently. This paper makes use of the panel data from different economies in order to provide a clearer picture on the FDI inflows. The results confirm that the governments are successful in absorbing foreign capital inflows through more liberal policies.

Economic growth in the presence of FDI: the perspective of newly industrializing economies

“…Most recent studies find a significant and positive effect of FDI on economic growth (Dees, 1998;Egger and Pfaffermayr, 2001;Chakraborty and Basu, 2002;Jensen, 2002). However, some studies do not support this result (Woo, 1995;Sin and Leung, 2001). A few studies even find a negative impact of FDI on economic growth (Branstetter,1996;Driffield and Munday, 1998;Gazioglou and Mccausland, 2002;Mcvicar, 2002).…”

The determinants of foreign direct investment: An extreme bounds analysis

“…However, it can be shown that by using three explanatory variables (the free variable and the two robust variables) and two dummies that account for the two extreme observations, more than 60 per cent of the variation in FDI inflows can be explained. Tsai (1994), Shamsuddin (1994), Billington (1999), Pistoresi (2000), Cheng and Kwan (2000), Tunman and Emmert (1999), Wang and Swain (1995), Love and Lage-Hidalgo (2000) Wages Location hypothesis +/-+/-/0 Wheeler and Mody (1992), Pistoresi (2000), Tsai (1994), Cleeve (2000), Lunn (1980), Culem (1988, Bolingen and Feenstra (1996), Cheng and Kwan (2000), Moore (1993), Yang et al (1993) Trade barriers Other -+/-/0 Lunn (1988), Culem (1988), Bolingen and Feenstra (1996) Growth rate Differential rates of return, diversification, internal financing + +/0 Billington (1999), Tsai (1994), Martin and Ottaviano (1999), Sin and Leung (2001) Openness Other + +/0 Kravis and Lipsey (1982), Pistoresi (2000), Wheeler and Moody (1992), Gyapong and Karikari (1999), Sin and Leung (2001) Trade deficit Other ? +/- Tsai (1994), Shamsuddin (1994), Pisoresi (2000 Exchange Rate…”

Labour market competitiveness and foreign direct investment: The case of Malaysia, Thailand and the Philippines

“…However, there have been many studies with an empirically-identified variety of factors that can affect FDI inflows. These factors include several macroeconomic variables, business conditions, and also the socio-political environment (Dunning 1981;Graham and Krugman 1991;Krugman and Obstfeld 1994;Thompson and Poon 1998;Sin and Leung 2001;Nunnenkamp 2002). Yet little has been learned regarding the influence of labour market competitiveness on the FDI inflows into host countries.…”

“…In the same context, Sin and Leung (2001) used data from various countries to test whether the GDP growth rate (an indicator of the rate of return to FDI), government policy and the exchange rate have an impact on FDI inflows. Surprisingly, they found that the only significant variable was a variable reflecting government investment policy, which was positively related to the FDI inflows into the western hemisphere, Asia and Africa.…”