Beruflich Dokumente
Kultur Dokumente
Prashant Kulkarni
Asst. Professor, Indian Business Academy, Bangalore
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Foreign Direct Investment
Net inflows of investment to acquire a lasting
management interest (10 percent or more of
voting stock) in an enterprise operating in an
economy other than that of the investor (World
Bank)
Critical element in the flow of international
capital.
Less volatile
Shift towards services sector
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Objectives
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Literature Survey
Hymer (1960)
eclectic paradigm of FDI theory by focusing on firm specific
advantages
Vernon (1966)
concept of product life cycle into theories international trade
to explain the existence of international trade, production
and consequently capital flows
Dunning (1981, 1986)
Extended the framework of the OLI paradigm to develop the
investment development path (IDP) theory.
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Contd..
Gastanaga, Nugent, and Pashamova (1998)
Countries with relatively liberalized capital accounts tend to
attract more foreign direct investment flows.
Feldstein (2000)
Case of risk reduction through free flows in the international
capital by allowing the owners of the capital to diversify their
lending and investment
Bosworth and Collins (1999) and Mody and Murshid
(2001)
Near unitary correlation between FDI and domestic
investment.
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Methodology
We define Growth as a function of
GROWTH= f(LABOUR, OPENNESS, EXCHANGE, CAPITAL,
GOVERNMENT, FDI)
Where
GROWTH- Real GDP per capita
LABOUR- Labour force in the economy
OPENNESS- Export + Imports of the economy / 2
EXCHANGE- Exchange rate
CAPITAL- GCF as % of GDP
GOVERNMENT- Government expenditure as % of GDP
FDI- FDI inflows as % of Gross Capital Formation
International Conference on
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Delhi, Sep 8-12, 2008
The regression equation is
GROWTH= α +β0 LABOUR+ β1OPENNESS+ β2
EXCHANGE + β3CAPITAL + β4GOVERNMENT +
β5FDI + Error
International Conference on
Recent Developments in
Economics, Hotel Hans New
Delhi, Sep 8-12, 2008
Our analysis used the T-statistic to test our
hypothesis.
We also used the co-relation study to
understand the relation between GDP and
FDI inward stock and also the relation
between FDI inflows and Gross Fixed Capital
Formation.
We also made use of bar charts and
diagrams apart from the normal tools and
mean and standard deviation
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Proposition
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Data Description
International Conference on
Recent Developments in
Economics, Hotel Hans New
Delhi, Sep 8-12, 2008
Classified the countries into developed and
developing countries as per the classification
adopted by WDI databases.
The time period of the data is between 1980-
2005.
Our sample was initially 85 countries (25
developed and 60 developing). However in
some cases, the missing data resulted in a
final sample size of 76 countries (25
developed and 51 developing countries).
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Results of Analysis
10.000
8.000
Real gdp per capita
6.000
-4.000
Developing countries
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
5.000
4.000
Real gdp per capita
3.000
-2.000
developed countries
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Correlation Table
Developing countries
Labou Opennes Exchange Capital Govt FDI
r s
Labour 1.000
Openness -0.246 1.000
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Multiple correlation and
coefficient of Determination
R R2 Adj R2 S.E
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008
Inferences and Scope for Future
Work
The results of regression on growth provide
indicators of FDI influencing the growth.
The influence however seems weak in case of
developing countries.
Correlation between FDI and growth is stronger in
developed world as compared to developing world
Capital formation does not show any significant
relationship with economic growth
International Conference on Recent Developments in Economics, Hotel Hans New Delhi, Sep 8-12, 2008