Exchange rate, political environment and FDI decision

Deseatnicov, Ivan; Akiba, Hiroya

doi:10.1016/j.inteco.2016.05.002

Cited by 29 publications

(13 citation statements)

References 24 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…FDI establishes a symbiotic relationship between the donor and the host countries where both benefit from capital transfer, Research and Development (R&D), technology and knowledge transfer, cheap labor, and institutional development (Arel-Bundock 2017; Hu et al 2021;Liu et al 2016;Ning and Wang 2018;Temiz and Gökmen 2014). While investing, the Multinational Companies (MNCs) primarily focus on the economic globalization, location determinants, infrastructural development, political environment, effective cross-border trade regulations, and institutional factors of the host economies (Alam et al 2019;Contractor et al 2020;Deseatnicov and Akiba 2016;Kleineick et al 2020;Paul and Jadhav 2019). Apart from the said factors, some other country-specific determinants of FDI are deemed very influential.…”

Section: Introductionmentioning

confidence: 99%

Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach

Morshed

Hossain

2022

SN Bus Econ

View full text Add to dashboard Cite

We tested the causality between FDI and its determinants in Bangladesh in the presence of structural break harnessing Vector Autoregression (VAR) model and Granger causality test. Regressors such as GDP growth rate, inflation, interest, corporate tax, exchange and wage rate, and trade openness (TO) have been used. VAR model finds that interest, tax, wage, and exchange rate do not affect inward FDI. However, the inflation rate and TO significantly impact the inward FDI in Bangladesh. The Granger causality test reveals a bidirectional causality in the FDIinflation and FDI-TO nexus, whereas other explanatory variables do not cause the FDI granger. Variance decomposition (VDC) and impulse response function (IRF) assessment approve strong, moderate, and poor or no explanatory power of TO, inflation, and other explanatory variables, respectively. Regarding FDI-inflation bidirectional causality, we observed both natural (inflation truly causes FDI) and fake causality (FDI does not necessarily cause inflation). Therefore, when inflation causes FDI, then Bangladeshi Taka (BDT) becomes strong against USD, which increases import and reduces export (import > export). Due to the negative trade balance, this is true for Bangladesh. However, if FDI causes inflation, it will depreciate BDT; consequently, the export will surpass the total import, which is not the case in Bangladesh. Therefore, inflation causes FDI in Bangladesh, and this punch line ends the ongoing debate in the FDI-inflation-exchange rate nexus in Bangladesh. Finally, we recommend decreasing the lending interest rates to encourage further investment, adopting tax holidays, developing a skilled and semi-skilled workforce to harness the advantage of lower wage rates, and being more open to facilitating FDI-led development.

show abstract

Section: Introductionmentioning

confidence: 99%

Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach

Morshed

Hossain

2022

SN Bus Econ

View full text Add to dashboard Cite

show abstract

“…Furthermore, multinational companies have asymmetric tolerance to political risk. In their paper, authors Deseatnicov and Akiba (2016) came to the conclusion that the risk perception of multinational companies originating in developed countries differs significantly from those originating in developing countries. Contractor et al (2021) focus on a wide range of regulatory variables and their impact on FDI attractiveness.…”

Section: Literature Reviewmentioning

confidence: 99%

Political environment as a factor of foreign investment in Serbia

Domazet¹,

Marjanović²,

Lazić³

2023

Srpska politička misao

View full text Add to dashboard Cite

The purpose of the paper is to research the influence of political environment factors on the inflow of foreign investments in Serbia. Keeping in mind that many countries in Southeast Europe find themselves in a situation where foreign investments are a necessity and a need for whole economic development, this research focused on Serbia owing to its results in foreign investment attraction during a transition period. Primary data collected using a survey technique on 88 foreign companies that invested in Serbia from 2001 to 2019 were analysed using a quantitative methodology (ANOVA and t-test). The results indicate that the stability of the government and the rule of law are the most important conditions for foreign investors in Serbia. This research's originality is reflected in the primary data and research results obtained.

show abstract

“…Table 5 has the results for external debt default and restructuring on different types of FDI when controlling for different political risk ratings. As shown by Deseatnicov and Akiba (2016), investors do pay close attention to the effect of local politics on economic affairs before investing in foreign countries, more in…”

Section: Sensitivity Analysismentioning

confidence: 99%

External Debt Default and Foreign Direct Investments

Thakkar¹,

Ayub²

2022

Bulletin of Applied Economics

View full text Add to dashboard Cite

We analyze the effect of a country’s defaults and restructuring its’ official and private external debt on its ability to attract foreign direct investment. We use different types of foreign direct investments: FDI Flows, Horizontal FDI, vertical FDI, cross-border mergers & acquisitions, and greenfield FDI. Using the Poisson-Pseudo Maximum Likelihood (PPML) estimation method, which has never been used in the literature to do a similar analysis, we find that external debt default decreases all types of FDIs. Furthermore, we also conduct a more granular sensitivity analysis by analyzing the effect of political risk ratings, effect on non-advanced economies, and effect on highly indebted poor countries (HIPC). We find that cross-border mergers and acquisitions (M&A) decrease as corruption risk decreases and increases as law and order improve. For HIPC countries, official external debt restructuring increases greenfield FDI. JEL classification number: C1, C33, D72, F21, H63, O57. Keywords: Debt Default, Restructuring, Foreign Direct Investment (FDI), External Debt, ICRG, Poisson-Pseudo Maximum Likelihood (PPML), Political Risk.

show abstract

Exchange rate, political environment and FDI decision

Cited by 29 publications

References 24 publications

Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach

Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach

Political environment as a factor of foreign investment in Serbia

External Debt Default and Foreign Direct Investments

Contact Info

Product

Resources

About