The study aims to analyze mechanisms by which foreign direct investment inflows (FDI) contributes to gross domestic product (GDP) in Asian countries. FDI is used as an independent variable. GDP is used as dependent variable. Export (EXP), house hold consumption (HHC), and gross capital formation (GCF) are used as mediator variables. Many studies analyzed direct relationships between FDI and GDP without explaining how FDI contributed to GDP. Therefore, little is known about the way FDI contributes to GDP in the receiving country. The study focuses on the question: What is the indirect relationship between FDI and GDP in Asian Countries?
The novelty of this paper is to provide a deep understanding on how FDI is related to GDP in Asian countries which did not get much attention in prior literature. The study used causal mediation analysis with bootstrap procedure. Annual data 2018 related to FDI, GDP, EXP, HHC, and GCF were collected from the World Bank website.
The impact of foreign direct investment on economy growth got much attention in all continents. The findings of the prior researches show mixed results. Some of them concluded that FDI has positive impact on GDP. While other concluded that FDI has negative effect on GDP. For instance, Raghuveer and Muthusamy (2019) investigated the relationship between FDI and economic growth in some Asian countries including Bangladesh, China, India, Lao PDR, Mongolia, Korea Republic and Sri Lanka. They used Ordinary Least Squares, Augmented Dicky-Fuller and Granger Causality test, and found that the effect of FDI inflow on economic growth was not the same in the analyzed countries. Diouf and Hai (2017) examined the effect of the interaction between FDI, trade openness and economic growth with by focusing on Asian FDI, trade and 13 West African countries covering the period 1980-2015. They used Fully Modified Ordinary Least Squares.
Table of Contents
1 Introduction
2 Literature Review
3 Methodology
4 Result and Discussion
4. 1 Descriptive statistics
4.2 Causal mediation Analysis
4.3 Managerial Implication
5 Conclusion
Research Objective and Scope
The primary objective of this study is to analyze the indirect mechanisms through which foreign direct investment (FDI) inflows contribute to the gross domestic product (GDP) in Asian countries, addressing the research question regarding how FDI influences economic growth via mediator variables.
- The mediation effect of export (EXP) on the relationship between FDI and GDP.
- The mediation effect of household consumption (HHC) on the relationship between FDI and GDP.
- The mediation effect of gross capital formation (GCF) on the relationship between FDI and GDP.
- The application of causal mediation analysis using bootstrapping procedures.
- An evaluation of indirect versus direct economic impacts of FDI in host economies.
Excerpt from the Book
1 Introduction
The impact of foreign direct investment on economy growth got much attention in all continents. The findings of the prior researches show mixed results. Some of them concluded that FDI has positive impact on GDP. While other concluded that FDI has negative effect on GDP. For instance, Raghuveer and Muthusamy (2019) investigated the relationship between FDI and economic growth in some Asian countries including Bangladesh, China, India, Lao PDR, Mongolia, Korea Republic and Sri Lanka. They used Ordinary Least Squares, Augmented Dicky-Fuller and Granger Causality test, and found that the effect of FDI inflow on economic growth was not the same in the analyzed countries. Diouf and Hai (2017) examined the effect of the interaction between FDI, trade openness and economic growth with by focusing on Asian FDI, trade and 13 West African countries covering the period 1980-2015. They used Fully Modified Ordinary Least Squares (FMOLS, and their findings revealed that FDI and trade significantly contributed to economic growth. Raj and Pahwa (2018) investigated the impact of FDI inflows on the economic growth of India using regression technique and with regression model. They concluded that FDI had a significant impact on the growth of Indian economy. Isaac and John (2017) analyzed the quantifiable effect and path of Chinese FDI on economic growth in Africa by analyzing a sample of 20 African countries for the period 2003 to 2012.They concluded that increasing a 1 percent in China’s FDI stock in Africa significantly raised Africa’s gross domestic product (GDP) growth by 0.607 percent, provide that all things remain equal.
Summary of Chapters
1 Introduction: This chapter reviews existing literature on FDI and economic growth, highlighting inconsistent findings and establishing the need to analyze indirect mediation effects.
2 Literature Review: This section critically analyzes prior research regarding FDI's impact on GDP components, providing theoretical support for the current study's focus on indirect relationship mechanisms.
3 Methodology: The chapter details the research design, focusing on the use of bootstrapping procedures and causal mediation analysis to examine data from 37 Asian countries.
4 Result and Discussion: This section presents descriptive statistics and empirical evidence on how EXP, HHC, and GCF mediate the relationship between FDI and GDP, followed by implications for managers and policy makers.
5 Conclusion: The final chapter summarizes the research findings, confirming that FDI contributes positively to GDP through mediation variables and aligning these results with previous academic insights.
Keywords
Foreign Direct Investment, FDI, Gross Domestic Product, GDP, Causal Mediation Analysis, Export, EXP, Household Consumption, HHC, Gross Capital Formation, GCF, Economic Growth, Asian Countries, Bootstrapping, Indirect Effect.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper examines the indirect relationship between foreign direct investment (FDI) inflows and gross domestic product (GDP) in Asian countries, specifically investigating how FDI influences economic growth through intermediary channels.
What are the central themes addressed in the study?
The core themes include the impact of FDI on economic growth, the role of mediator variables such as export, household consumption, and gross capital formation, and the application of causal mediation analysis.
What is the main research question?
The research asks: "What is the indirect relationship between foreign direct investment inflows and gross domestic product in Asian countries?"
Which scientific methodology is employed?
The study utilizes a causal mediation analysis based on a bootstrap resampling procedure, which is specifically suited for testing mediation effects in datasets with smaller sample sizes.
What does the main body of the work cover?
The main body covers the literature review on FDI impacts, the methodological framework, descriptive statistics for the variables, and detailed empirical findings regarding the mediation effects of export, household consumption, and gross capital formation.
Which keywords best characterize this work?
The work is characterized by terms like Foreign Direct Investment, GDP, Causal Mediation Analysis, and the specific economic mediators: export, household consumption, and gross capital formation.
How does FDI indirectly contribute to GDP according to the findings?
The study finds that FDI contributes to GDP by increasing export performance, household consumption, and gross capital formation, which act as full mediators in the relationship.
Is the direct relationship between FDI and GDP significant in this study?
No, the empirical results indicate that the direct relationship between FDI and GDP was not statistically significant, highlighting that the impact is primarily indirect through the identified mediator variables.
- Citar trabajo
- Dr. Antoine Niyungeko (Autor), 2021, Mechanisms of how FDI contributes to GDP in Asian Countries. A study, Múnich, GRIN Verlag, https://www.grin.com/document/991803
