FDI and Growth: What Cross-Country Industry Data Say

Cipollina, Maria; Giovannetti, Giorgia; Pietrovito, Filomena; Pozzolo, Alberto Franco

doi:10.2139/ssrn.1836243

Cited by 17 publications

(25 citation statements)

References 75 publications

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“…is positive in some studies (Hansen and Rand 2006;Cipollina et al 2012;Driffield and Jones, 2013) but negative in others (Herzer 2012;Prasad, Rajan and Subramanian 2007).…”

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confidence: 90%

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Weakness in Investment Growth: Causes, Implications and Policy Responses

Kose¹,

Ohnsorge²,

Ye³

et al. 2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Investment growth in emerging market and developing economies has slowed sharply since 2010. This paper presents a comprehensive analysis of the causes and implications of this slowdown and presents a menu of policy responses to improve investment growth. It reports four main results. First, the slowdown has been broad-based and most pronounced in the largest emerging markets and in commodity exporters. Second, it reflects a range of obstacles: weak activity, negative terms-of-trade shocks, declining foreign direct investment inflows, elevated private debt burdens, heightened political risk, and adverse spillovers from major economies. Third, by slowing capital accumulation and technological progress embedded in investment, weak post-crisis investment growth has contributed to sluggish growth of potential output in recent years. Finally, although specific policy priorities depend on country circumstances, policymakers can boost investment both directly, through public investment, and indirectly, by encouraging private investment, including foreign direct investment, and by undertaking measures to improve overall growth prospects and the business climate. JEL Classification Numbers: E22, F2, F6, O1, O4 Terms of use: Documents in

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“…is positive in some studies (Hansen and Rand 2006;Cipollina et al 2012;Driffield and Jones, 2013) but negative in others (Herzer 2012;Prasad, Rajan and Subramanian 2007).…”

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confidence: 90%

“… Sectoral composition of FDI. FDI in the primary and services sectors tends to have fewer backward and forward linkages to other domestic sectors and, hence, boost growth less than FDI in the capital-intensive and technologically advanced manufacturing sector (Aykut and Sayek 2005;Cipollina et al 2012;Chakraborty and Nunnenkamp 2008).…”

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confidence: 99%

Weakness in Investment Growth: Causes, Implications and Policy Responses

Kose¹,

Ohnsorge²,

Ye³

et al. 2017

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“…Following the growth crises of the 1970s-80s, commercial bank lending had drastically reduced, leading policymakers to ease restrictions on inward penetration of foreign investments (Aitken and Harrison, 1999). Hence, many countries in the SSA region have pursued inward pro-FDI policies with the aim of deriving benefits such as new technologies, increased employment, capital inflows, and greater contact with foreign markets (Cippolina, Giovannetti, Pietrovito, and Pozzolo, 2012;Görg and Greenaway, 2004;Görg and Strobl, 2005). Consequently, FDI inflows have persistently increased in SSA since the early '90s as shown in Figure 1.…”

Section: Introductionmentioning

confidence: 99%

FDI And Economic Growth Relationship In Sub-Saharan Africa: Is The Domestic Financial System A Significant Intermediator?

Olagbaju¹,

Akinlo²

2018

ABR

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This paper contributes to the literature on the effect of Foreign Direct Investment (FDI) on economic growth by examining the role of financial development as a source of absorptive capacity in the FDI-economic growth relationship in Sub-Saharan Africa (SSA). Using panel data econometric techniques and an unbalanced dataset of 1989-2013, we examine the independent effect of FDI on economic growth, as well as the impact of an interactive relationship between FDI and financial development on economic growth in SSA. We find that FDI does not directly lead to economic growth in SSA. However, the financial system through banking sector development enhances the effect of FDI on economic growth in the region. This finding is linked to the existence of a causal relationship between banking sector development and FDI, which is stronger in the low-income subsample relative to the middle-income subsample and the full SSA sample. We also estimate the threshold financial development levels essential for the expected FDI-economic growth effect to occur. Finally, the study recommends that strategies toward the attraction of foreign capital in SSA must be complemented by measures to develop the domestic financial system.

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“…Moreover, they show that capital and labor are continuously reallocated away from the more rapidly growing sector. Cipollina et al (2011) highlights three major explanations of why FDI may potentially enhance the growth rate at the industry level in the host country: Technological innovation, labor accumulation, and capital accumulation. Their analysis provides evidence of positive and statistically significant effects of FDI on the rate of growth of the industries in host countries, and shows that this effect is stronger in capital intensive sectors, and in sectors with higher levels of technological development.…”

Section: Literature Reviewmentioning

confidence: 99%