This study aims identifying the mediation effect of export in the relationship between FDI and GDP in low and middle low-income African countries. The study uses correlation analysis, Baron and Kenny method, Bootstrap procedure and Sobel test to investigate the significance of the indirect effect.
The relationship between foreign direct investment (FDI) inflows, exports and economic growth as measured by gross domestic product (GDP) has been a global interest of academics and policy-makers, but research methods did not allow the characterization of the indirect mediating effects that exports have on that relationship. The result of the analysis shows a partial mediation of exports in the relationship between FDI and GDP. The study demonstrates the indirect effect caused by FDI through export. It is therefore recommended that low and middle low-income African countries should stimulate foreign direct investment to boost their exports, and gross domestic product. Additionally, these countries should find new ways of financing exports as FDI are predicted to fall due to the Covid-19 pandemic during 2020.
Table of Contents
1. Introduction
2. Literature Review
2.1. Definition and Previous Findings
2.2. Previous Methodology
3. Methodology
4. Research Results
4.1. Descriptive statistics
4.2. Correlation Analysis
4.3. Mediation Analysis Result
5. Result Discussion and Conclusion
5.1. Results Interpretation
6. Conclusion
Research Objectives and Core Themes
The primary objective of this study is to analyze the mediating role of exports in the relationship between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) specifically within low and low-middle income African countries. The research aims to clarify whether FDI influences economic growth directly or if this effect is channeled through the export sector, filling a gap in existing literature that has primarily focused on direct causality.
- Analysis of the relationship between FDI, exports, and GDP.
- Application of mediation analysis to determine indirect economic effects.
- Investigation of economic data across 28 low and low-middle income African nations.
- Comparison of statistical methods including Baron and Kenny, Sobel test, and Bootstrap procedure.
Excerpt from the Book
1. Introduction
The analysis of the relationship between FDI exports and economic growth as measured by GDP has attracted academic world and policy-makers. Nevertheless, little is known about the way FDI transfers effects on GDP through EXP. Some researchers found a positive impact of FDI on GDP, while others found a negative impact. For instance, Rubens (1999) indicated that FDI in Africa can contribute significantly to the economic development of the continent. George, James and Peter (2013) recognized that FDI is an essential in developing countries, as FDI increases resources available for investment and capital formation, facilitates transfers of technology, increases skills and innovative capacity, and enhances organizational and managerial practices. Joseph (2015) used correlation and regression analysis to find relationship between GDP per capita and FDI in Rwanda, and found a strong positive relationship between the FDI inflows, and the GDP per capita.
Christie (2018) analyzed the long-run positive relationship between foreign agricultural investment and economic growth in Sub-Saharan Africa, and found a positive link between foreign agricultural investment and economic growth in the long-run. Arafatur and Summit (2015) analyzed the causal relationship between FDI and GDP in Bangladesh. The cointegration test confirmed the existence of a long-run equilibrium relationship between the two variables. The use of a Granger causality test showed unidirectional causality which runs from FDI to GDP. Nadeem, Naveed, Zeeshan and Sonia (2013) analyzed the relationship between FDI and GDP in Pakistan. Using correlation analysis and a regression model, they found a positive relationship between FDI and GDP. Qaiser, Salman, Ali, Hafiz, and Muhammad (2011) analyzed the impact of FDI on GDP of SAARC countries from 2001 to 2010. The result of multiple regressions showed a positive and significant relationship between GDP and FDI while an insignificant relationship was found between GDP and inflation.
Summary of Chapters
1. Introduction: Provides an overview of the academic discourse regarding FDI and economic growth, highlighting the research gap concerning the indirect mediating effect of exports.
2. Literature Review: Defines key economic indicators and synthesizes previous scholarly findings and methodologies used to analyze the link between foreign investment and growth.
3. Methodology: Details the data collection process from 28 African countries and outlines the statistical mediation approach utilized to test the research hypotheses.
4. Research Results: Presents descriptive statistics, correlation matrices, and the specific outcomes of the Baron and Kenny mediation analysis and Bootstrap procedures.
5. Result Discussion and Conclusion: Interprets the regression coefficients and confirms the significant mediating role of exports in the FDI-GDP relationship.
6. Conclusion: Summarizes the study's findings and offers policy recommendations for African countries to stimulate FDI as a tool for boosting exports and GDP.
Keywords
Foreign Direct Investment, FDI, Exports, GDP, Economic Growth, Mediation Analysis, African Countries, Baron and Kenny Method, Bootstrap Procedure, Sobel Test, Correlation Analysis, Technology Transfer, Capital Accumulation, Developing Economies, Causality
Frequently Asked Questions
What is the fundamental focus of this research paper?
The paper focuses on investigating the economic relationship between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) in low and low-middle income African nations, specifically analyzing if exports act as a mediator in this process.
What are the primary thematic fields addressed in this study?
The study intersects international economics, development economics, and quantitative research methods, specifically evaluating how investment flows affect domestic productivity and market expansion.
What is the central research question?
The research asks whether the impact of FDI on GDP in African countries is direct or if it is facilitated through exports, and how significant this indirect effect is.
Which scientific methods are applied in the analysis?
The author uses correlation analysis, the Baron and Kenny method for mediation, the Sobel test for indirect effects, and the Bootstrap resampling procedure to validate the statistical significance of the models.
What is covered in the main body of the work?
The main body covers a comprehensive review of previous literature on FDI and growth, a clear description of the methodology used for the 28-country data set, and a detailed breakdown of the statistical results and their interpretation.
How can this work be characterized by its keywords?
The study is characterized by keywords related to macro-economic investment metrics (FDI, GDP, Exports) and statistical techniques used to analyze causal mediation in developing economies.
Why was the "mediation approach" chosen for this specific study?
It was chosen because traditional linear regressions often fail to capture the nuanced path through which investment benefits a host country; using exports as a mediator provides a more granular understanding of the development mechanism.
What does the result of "partial mediation" imply for policymakers?
Partial mediation implies that while FDI does boost GDP directly, it also significantly enhances GDP by fostering export capacity, suggesting that policies should simultaneously target both FDI attraction and export-friendly infrastructure.
How did the author handle the problem of multicollinearity?
The author omitted variables like imports, gross capital formation, and household consumption in specific regression steps to avoid multicollinearity, as these variables were highly correlated with FDI.
What unique recommendation does the author provide in light of the Covid-19 pandemic?
The author suggests that because FDI inflows are predicted to decline due to the pandemic, these African countries must proactively seek new, diversified ways to finance their exports to maintain economic stability.
- Arbeit zitieren
- Antoine Niyungeko (Autor:in), 2020, Exports as a Mediator Variable Between Foreign Direct Investment Inflows and GDP in Low and Low-Middle Income African Countries, München, GRIN Verlag, https://www.grin.com/document/924593
