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Article
Publication date: 15 June 2021

Amna Zardoub

Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be…

4000

Abstract

Purpose

Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – foreign direct investment, remittances and official development assistance – can be a key factor in the development of the economy. The purpose of this study is to analyze the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been used. As part of this study, an attempt was made to use a combined autoregressive distributed lag (ARDL) panel approach to study the short-term and long-run effects of financial flows on economic growth. The results indicate ambiguous effects. Economically, the effect of financial flows on economic growth depends on the investor’s expectations.

Design/methodology/approach

To study the short-run and long-run effects of financial flows on economic growth, this paper considers an empirical approach based on the panel ARDL. This model makes it possible to distinguish between the short-run effect and the long-run one. This type of model is based on three estimators, namely, mean group, pooled mean group (PMG) and dynamic fixed effect.

Findings

Results confirm the existence of a long-run relationship because the adjustment coefficient (error correction parameter) is negative and statistically significant. This paper finds that the PMG estimator is more consistent and more efficient. In the short-run, foreign direct investment do negatively affect economic growth, the effect is no significant in the long-run. On the other hand, the effect of remittances on economic growth is significant in the short-run. However, it is no significant in the long-run. Finally, the results suggest that the effect of official development assistance on economic growth is insignificant; both in the long-run and in the short-run.

Originality/value

To study the interaction between financial flows and economic growth, some empirical methodology are used such as the dynamic panel data and the autoregressive vector (VAR) model. In this study, we apply the panel ARDL model to analyze the short-run and the long-run effect for each financial flow on economic growth. The objective is to study the heterogeneity on dynamic adjustment in the short-term and long-term.

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Article
Publication date: 15 July 2024

Thangamani Bhavan

The purpose of this study is to investigate the effectiveness of foreign aid in terms of trade in Sri Lanka. This study aims to analyze whether foreign aid from the Western…

13

Abstract

Purpose

The purpose of this study is to investigate the effectiveness of foreign aid in terms of trade in Sri Lanka. This study aims to analyze whether foreign aid from the Western countries to Sri Lanka promotes exports to the donor countries and encourages imports from Asian countries.

Findings

The results derived from the analysis suggest that there is no significant relationship between aid and trade in the long run whereas foreign aid marginally causes only the imports in the short run. Overall, the study finds that foreign aid does not significantly affect trade in Sri Lanka.

Methodology

The auto regressive distributed lag bounds testing approach is used to examine the long- and short-run relations between foreign aid and trade using the annual time series data during the period from 1977 to 2019.

Practical implications

Sri Lanka has been one of the aid recipients among Asian countries since 1960. At the same time, Sri Lanka has been experiencing trade deficit since its independence and has to find all the ways to improve the trade. Because foreign aid has promoted trade in a numerous countries, it is high time for Sri Lanka to negotiate with the donor countries and agencies to design aid for trade promotion.

Originality

The nexus between the trade–aid link of Sri Lanka with Western and Asian country’s perspectives has not so far been investigated. The findings of this study would be a new knowledge added to the literature on the trade–aid link and be useful to the policymakers for decision-making and future researchers to cope up with further analysis.

Details

International Journal of Development Issues, vol. 24 no. 1
Type: Research Article
ISSN: 1446-8956

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Article
Publication date: 6 March 2017

Bishnu Kumar Adhikary

The purpose of this paper is to investigate the macroeconomic determinants of foreign direct investment (FDI) for the top five South Asian economies, namely, Bangladesh, India…

2742

Abstract

Purpose

The purpose of this paper is to investigate the macroeconomic determinants of foreign direct investment (FDI) for the top five South Asian economies, namely, Bangladesh, India, Pakistan, Sri Lanka, and Nepal, and to examine whether these factors are the same for each.

Design/methodology/approach

This study employs fully modified ordinary least squares and two-stage least squares estimation methods.

Findings

This study shows that South Asian economies have a number of FDI determinants in common. For example, market size and human capital are the two most common factors attracting FDI in each country (except for Nepal, which revealed a negative correlation between FDI and market size). Other factors, such as infrastructure, domestic investment, lending rates, exchange rates, inflation, financial stability/crisis, and stock turnover entered into regression with both positive and negative signs, thereby indicating that the underlying theories on FDI do not provide a clear prediction of the direction of the effect of a particular variable on FDI.

Research limitations/implications

This paper studied the effects of demand-side factors on FDI. A comparative study of the supply-side factors may add further knowledge.

Practical implications

This paper provides evidence to show that the determinants of FDI are indeed country-specific. Thus, to design a suitable FDI policy, it would not be wise to solely rely on other economies’ FDI experiences.

Originality/value

This paper provides updated evidence on factors that are essential to promoting or deterring FDI in South Asian economies.

Details

South Asian Journal of Business Studies, vol. 6 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

Available. Open Access. Open Access
Article
Publication date: 21 May 2024

Dongni Wang and Carmen Fillat-Castejón

The purpose of this paper is to analyse the institutional threshold effects of foreign aid on foreign direct investment (FDI).

682

Abstract

Purpose

The purpose of this paper is to analyse the institutional threshold effects of foreign aid on foreign direct investment (FDI).

Design/methodology/approach

This paper develops a theoretical model from an extended Solow model that introduces the conductive effect of institutions in an aid recipient country towards the capacity of attracting FDI. This study evidences threshold effects with the most recent panel threshold models that consider endogeneity issues. The data on economic institutions and foreign aid are decomposed into disaggregated level to reveal the detailed threshold pattern. Several sample subsets are used for a heterogeneity analysis.

Findings

Conducting empirical research on a sample of 62 countries during the period 2003–2016, this study finds robust evidence of the existence of an institutional threshold in the aid–FDI nexus which a country must attain to reap the full attraction of FDI by foreign aid providing financial resources. Furthermore, foreign aid tends to promote FDI in institutions characterized by a right-sized government, a strengthened legal system and an appropriate regulatory environment. On the other hand, aid may crowd out FDI. The results are robust to regional combinations and a subset of low and lower-middle-income countries. In addition, this study finds that aid targeted at social infrastructure and services has a positive effect regardless of institutional threshold.

Originality/value

This paper contributes to the literature by introducing a non-linear and discontinuous effect of aid on FDI, i.e. a threshold effect, highlighting the relevance of legal systems and regulations and the possibility of a crowding-out effect on FDI for specific institutional regimes. The thresholds provide a guide for donor countries to ensure aid effectiveness at the risk of being counterproductive and for recipient countries to better assess the institutional dimensions that need to be improved.

Details

Applied Economic Analysis, vol. 32 no. 96
Type: Research Article
ISSN: 2632-7627

Keywords

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Publication date: 17 June 2024

Nassir Ul Haq Wani

Recognising the significance of international trade in economic growth, this research explores the drivers of exports in South Asian Association for Regional Cooperation countries…

Abstract

Recognising the significance of international trade in economic growth, this research explores the drivers of exports in South Asian Association for Regional Cooperation countries from 2008 to 2021. The study employs the export demand model and the augmented exports supply model and utilises pooled time-series data. This study questions whether export supply decisions are based on traditional trade model factors, emerging trading realities or macroeconomic variables. The model based on fixed effects evaluates the connection between exports and their possible drivers. Traditional export supply models suggest determinants like production capacity, variable cost and relative pricing influencing South Asian export supply performance substantially. Changes in trade, for example, have a substantial impact on export supply, demonstrating that the trade liberalisation procedure promotes growth in exports, compression in imports and technological advancement. The worsening state of the energy industry and growing levels of corruption have proved to be significant deterrents to export supply decisions. The results verify foreign direct investment's positive and medium influence on the expansion of exports. Other variables, however, such as GDP and its growth, Official Development Assistance (ODA), development expenditure, indirect taxation, labour supply and the exchange rate of currencies, have a positive impact on the flow of exports. Furthermore, the data corroborate the notion that increased savings have a significant beneficial influence on the flow of exports. The study proposes that concerned governments examine their export policies and adopt new policies adapted in accordance with changing circumstances with the goal of increasing and enhancing the performance of exports.

Details

Policy Solutions for Economic Growth in a Developing Country
Type: Book
ISBN: 978-1-83753-431-9

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Article
Publication date: 20 September 2011

T. Bhavan, Changsheng Xu and Chunping Zhong

South Asia has been an important destination of foreign aid over the past decades. Since a large part of aid is disbursed for social and economic infrastructure development in…

1237

Abstract

Purpose

South Asia has been an important destination of foreign aid over the past decades. Since a large part of aid is disbursed for social and economic infrastructure development in South Asian countries, and the volume of aid has tremendously increased in recent years, the purpose of this study is to investigate how far various categories of foreign aid affects economic growth rate in these countries. In addition, as the trend of each category of aid transfer appears to have been volatile, this study also investigates whether the volatilities inhibit growth rate in these countries.

Design/methodology/approach

In this study, South Asia refers to India, Bangladesh, Pakistan and Sri Lanka. The Random effects approach is employed incorporating panel data for the period of 1995‐2008. The aggregate foreign aid is classified into various categories to have a comprehensive investigation.

Findings

Foreign aid positively associated with growth whereas the volatility of aid hurts it. Long‐impact aid promotes growth more than short‐impact aid does. The volatility of short‐impact aid hurts growth, whereas the volatility of long‐impact aid has no effect on it. Pure aid and its volatility have no effect on growth.

Originality/value

This study has identified the structure of foreign aid disbursed in these countries, and explored how far each category and respective volatility affects growth. These findings would be useful to the scholars and policy makers in the recipient countries as well as donors, to make foreign aid much more effective in future.

Details

International Journal of Development Issues, vol. 10 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

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Book part
Publication date: 16 January 2024

Oliver Mtapuri, Joseph Daitai, Mark Anthony Camilleri and Anna Dluzewska

The tourism industry may result in positive as well as negative effects for local communities. Although it is generating economic growth and job creation in different parts of the…

Abstract

The tourism industry may result in positive as well as negative effects for local communities. Although it is generating economic growth and job creation in different parts of the world, it can impact on sociocultural and ecological dimensions of destinations. A high influx of tourists can disrupt the residents' attitudes, behaviors, and their quality of life. It can also lead to the degradation of natural environments, including land, air, water, plants, and animals. In this light, this research raises awareness about the importance of managing tourism in a sustainable and responsible manner. The researchers deliberate about the opportunities and challenges of tourism. Afterward, they focus on the implementation of sustainable tourism development activities in the South African context. In conclusion, they put forward their recommendations for policymakers.

Details

Tourism Planning and Destination Marketing, 2nd Edition
Type: Book
ISBN: 978-1-80455-888-1

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Article
Publication date: 23 August 2019

Justin Paul and Pravin Jadhav

Foreign direct investment (FDI) is a strategic decision for achieving competitive advantage by multinational enterprises. The purpose of this paper is to explore the role of…

1935

Abstract

Purpose

Foreign direct investment (FDI) is a strategic decision for achieving competitive advantage by multinational enterprises. The purpose of this paper is to explore the role of institutional determinants of FDI using data from 24 emerging markets including China, India, Indonesia, Turkey, Thailand, Malaysia and Pakistan.

Design/methodology/approach

In order to identify factors that attract FDI in emerging markets, this study has used data from sources such as the World Bank, Index of Economic Freedom and UNCTAD.

Findings

The findings of this research indicate that infrastructure quality, trade cost measured by tariff and non-tariff barriers, institutional quality measured by effective rule of law, political stability, regulatory quality and control on corruption are significant determinants of FDI in emerging markets.

Originality/value

This is the first study to analyze the sectoral institutional determinants of Inward FDI in the important emerging economies, to the best of authors’ knowledge.

Details

International Journal of Emerging Markets, vol. 15 no. 2
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 27 May 2020

Nihar Ranjan Jena and Narayan Sethi

The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the South Asian region from 1996 to 2017.

303

Abstract

Purpose

The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the South Asian region from 1996 to 2017.

Design/methodology/approach

A sample of eight South Asian countries for the period 1996–2017 is being considered for this study. This study uses various econometrics tools such as Pedroni and Johansen–Fisher panel cointegration test, panel fully modified ordinary least square and panel dynamic ordinary least square (PDOLS) to ascertain the long-run and short-run dynamics among the variables under consideration.

Findings

The empirical results found that long-run, as well as the short-run relationship, exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the South Asian economies. The authors also found unidirectional causality running from foreign aid to economic growth. Both the long-run relationship as well as short-run causality between foreign aid and economic growth is unequivocally positive.

Originality/value

This study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in South Asian economies. Taking into account the diversity of level of growth experienced by the eight countries in the Asian region, this study uses an appropriate regression technique, i.e. PDOLS whose results are robust. Therefore, the policymakers in these countries are well-advised to implement suitable policy measures to ensure optimum utilization of foreign capital resources garnered by way of receipt of foreign aid and build on for stronger future economic growth.

Details

South Asian Journal of Business Studies, vol. 10 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

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Article
Publication date: 22 June 2021

Ahamed Lebbe Mohamed Aslam and Sabraz Nawaz Samsudeen

The objective of this study is to explore the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka over the period of 1960–2018.

233

Abstract

Purpose

The objective of this study is to explore the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka over the period of 1960–2018.

Design/methodology/approach

Both exploratory and inferential data analysis tools have been employed to examine the objective of this study. The exploratory data analysis covered the scatter plots, confidence ellipse with kernel fit. The inferential data analysis included the augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) unit root tests, the autoregressive distributed lag (ARDL) Bounds co-integration technique and the Granger causality test.

Findings

The test result of exploratory data analysis indicates that there is a positive relationship between foreign aid and economic growth. The ADF and PP unit root tests results indicate that the variables used in this study are stationary at their 1st difference. The co-integration test result confirms the presence of long-run relationship between foreign aid and economic growth in Sri Lanka. The estimated coefficient of foreign aid in the long-run and the short-run shows that foreign aid has a positive relationship with economic growth in Sri Lanka. The estimated coefficient of error correction term indicates that approximately 26.6% of errors are adjusted each year and further shows that the response variable of economic growth moves towards the long-run equilibrium path. The Granger causality test result shows that foreign aid in short-run Granger causes economic growth in Sri Lanka which means that one-way causality from foreign aid to economic growth is confirmed. Further, the estimated coefficient of error correction term confirms that there is the long-run Granger causal relationship between foreign aid and economic growth in Sri Lanka.

Practical implications

The findings of this study have some important policy implications for the design of efficient policy related to foreign aid and economic growth, the knowledge of which will help follow sustainable foreign aid and growth nexus.

Originality/value

This study contributes to the existing literature by using the newly introduced ARDL Bounds cointegration technique to investigate the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka.

Details

Journal of Economic and Administrative Sciences, vol. 39 no. 2
Type: Research Article
ISSN: 2054-6238

Keywords

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