The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

Chenaf-Nicet, Dalila; Rougier, Éric

doi:10.2139/ssrn.2575793

Cited by 13 publications

(12 citation statements)

References 82 publications

(48 reference statements)

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“…The findings of Russ (2004) are particularly pertinent for the debate concerning Brexit, as they highlight that not merely volatility in the real economy, but the source of that volatility is likely to impact on the relationship between currency fluctuations and FDI. This issue was explored in more detail by Chenaf-Nicet and Rougier (2016). The analysis here is analogous to the analysis on gross capital flows.…”

Section: Importance Of Currency Fluctuationsmentioning

confidence: 99%

Brexit and Foreign Investment in the UK

Driffield

Karoglou

2018

Journal of the Royal Statistical Society Series A: Statistics in Society

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Summary We explore the likely effect of Brexit on inward foreign direct investment (FDI) through its possible effect on the benchmark variables that characterize the macroeconomy. For this we propose the use of a Markov regime switching structural vector auto‐regression to distinguish between the volatile and stable states of the economy and account, among other effects, for the contemporaneous effects that the frequency of FDI innately generates. Our findings suggest that, if Brexit triggers a sterling depreciation in the current economic climate, this will fuel a prolonged negative effect on FDI. FDI flows may be positively affected (at most) by a sterling depreciation after Brexit only if this event drives the UK economy to a period of highly volatile growth, inflation, interest and exchange rates: a scenario that is rather unlikely. And, even then, the sterling depreciation benefits would last for only a short period of time.

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Section: Importance Of Currency Fluctuationsmentioning

confidence: 99%

Brexit and Foreign Investment in the UK

Driffield

Karoglou

2018

Journal of the Royal Statistical Society Series A: Statistics in Society

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“…Foreign direct investment (FDI) helps to fill the gap between savings and required level of investment (Sabir and Khan 2018). Globalization increased the importance of FDI worldwide and endogenous growth theories emphasize that FDI is a key determinant of economic growth because it is a source of technological transfer from developed countries to developing countries (Chenaf-Nicet and Rougier 2016). FDI can directly and indirectly reduce unemployment (Lipsey 2001) and increases productivity by improving the skills and knowledge of workers in the host country.…”

Section: Introductionmentioning

confidence: 99%

Institutions and FDI: evidence from developed and developing countries

2019

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This study investigates the impact of institutional quality on Foreign Direct Investment (FDI) inflows using panel data for low, lower-middle, upper-middle and high-income countries for the sample period of 1996-2016 using the system Generalized Method of Moments (GMM). The empirical results confirm that institutional quality has a positive impact on FDI in all group of countries. The magnitude of the coefficients of control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability for FDI inflows are greater in developed countries than in developing countries. We conclude that institutional quality is a more important determinant of FDI in developed countries than in developed countries. However, GDP per capita, agriculture value-added as a percentage of GDP, and inflation influence FDI inflows negatively in developed countries, while GDP per capita, trade openness, agriculture value-added as a percentage of GDP, and infrastructure have positive and statistically significant impacts on FDI inflows in developing countries. Trade openness as a percentage of GDP and infrastructure positively affect FDI in developed countries. From our analysis, we infer that institutional quality is a more important determinant of FDI in developed countries than in developing countries.

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“…The fact that capital destruction is not necessarily the result of political instability implies that there are more than political factors that explain capital accumulation. For example, macroeconomic instability has been found to negatively affect FDI (Chenaf‐Nicet & Rougier, ), the latter being strongly associated with capital accumulation (see econometric results).…”

Section: Data Sources and Empirical Resultsmentioning

confidence: 98%

Growth in fragile states in Africa: Conflict and post‐conflict capital accumulation

Nkurunziza¹

2018

Review Development Economics

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This article analyses the pattern of capital accumulation in Africa and its interaction with political fragility. Political fragility, defined as armed conflict or civil war, retards or reverses gains with respect to capital accumulation, slowing long-term economic growth. Many countries experience negative rates of capital accumulation, particularly during periods of acute political instability. In postwar periods, countries generally continue to experience capital destruction, lending support to the "war ruin hypothesis." This has implications for long-term economic growth in view of the strong association between capital accumulation and economic performance. The main policy implication of the analysis is that African countries and their international partners should pay more attention to capital accumulation, including capital reconstruction after periods of political instability, to lay the foundations for sustainable economic growth.

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The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

Cited by 13 publications

References 82 publications

Brexit and Foreign Investment in the UK

Brexit and Foreign Investment in the UK

Institutions and FDI: evidence from developed and developing countries

Growth in fragile states in Africa: Conflict and post‐conflict capital accumulation

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