Space panel model costruction of the correlation between FDI and local economic policy based on high dimensional data regression analysis

Huang, Zhen; Shang, Chao; Chen, Yanzhang

doi:10.3233/jifs-169662

Cited by 1 publication

(2 citation statements)

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“…Government spending (BSGDP) is measured as budget surplus in Zhejiang (percentage of total GDP). According to the relevant theoretical literature, the increase in spending on infrastructure in local government, such as transportation and communication, along with the tax incentives and land price concessions given by local government to foreign companies, can directly affect the cost and income of foreign direct investment [23]. When analysing the effect of exchange rate on FDI inflow, the influence of government spending on FDI should be controlled.…”

Section: Control Variablementioning

confidence: 99%

“…Based on the previous literatures, two models are established. Following Huang et al [23], Ali et al [25], and Chandra and Handoyo [26], to examine the influence effect of exchange rate on FDI inflow, government spending and trade openness, along with the exchange rate, are included in the first model to help obtain an unbiased estimation for the influence of exchange rate. As seen in equation ( 1), the coefficient of β 1 measures elasticity of changes of FDI inflow to the change of exchange rate:…”

Section: Model Specificationmentioning

confidence: 99%

See 1 more Smart Citation

Influence of Exchange Rate on Foreign Direct Investment Inflows: An Empirical Analysis Based on Co-Integration and Granger Causality Test

Tan

Gashaw

2021

Mathematical Problems in Engineering

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Although it is widely recognized that Foreign Direct Investment (FDI) inflows have a dominant effect on economic growth of host countries, the determinants of FDI inflows are still unclear. Especially, about the effect of exchange rate on FDI inflow, the results reached by scholars vary across countries or regions. It is of great practical and theoretical significance to explore the influencing effects of exchange rate on FDI inflow and identify the mechanisms that underlie them in close association with regional economic characters so as to help local government implement targeted government policies to achieve sustainable FDI inflow and sustainable economic growth. For this purpose, the influencing effects and the influencing mechanisms of the exchange rate on FDI inflows are investigated for Zhejiang province, China, over 1985–2019 by employing the co-integration tests, vector error correction models, Granger causality tests, and impulse response tests. Empirical results indicate that there are long-term stable and unidirectional causal relationship between the exchange rate and FDI inflow. Continuous appreciation of RMB against USD discourages FDI inflow. The mechanism which underlies the long-term relationship is the wealth effect, rather than the cost effect or the demand effect. By contrast, in the short run, neither the exchange rate nor the three influencing mechanism has a significant impact on FDI inflow. These results suggest policy recommendations for improving FDI by accumulating human capital and improving infrastructure. These findings are also applicable for other countries or regions with similar economic characters.

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Section: Control Variablementioning

confidence: 99%

Section: Model Specificationmentioning

confidence: 99%