Impact of Political Risk and Uncertainty on FDI in South Asia
AbstractThis study examines the potential effect of political risk and macroeconomic policy uncertainty on FDI in South Asia. To highlight the affect of political risk and macro policy uncertainty on FDI, we setup a theoretical framework based on oligopolistic and imperfect competition environment in host country. Autoregressive distributed lags (ARDL) is used to examine the impact of political risk and macro economic policy uncertainty index on FDI inflows. Macroeconomic policy uncertainty and political risk indices are constructed for this purpose. The long run results show negative affect of political risk and macroeconomic policy uncertainty indices on FDI inflows. Trade openness shows positive effect on FDI inflows only in short run while in long run it has negative impact on due lack of creditability regarding consistent trade liberalization policy and high trade cost. Furthermore, the market size significantly affects the inflow of FDI both in long run and short run which shows that FDI inflows in South Asia are mainly depend on market size. South Asian economies need to focus on political and macroeconomic factors along with FDI incentives policies to attract more FDI. Copyright Springer-Verlag 2012
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Transition Studies Review.
Volume (Year): 19 (2012)
Issue (Month): 1 (September)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=112913
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Khan, M.A. & Samad, G., 2010. "Intellectual Property Rights And Foreign Direct Investment: Analysis Of 14 South And South East Asian Countries, 1970-2005," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
- Lensink, Robert & Bo, Hong & Sterken, Elmer, 1999.
"Does uncertainty affect economic growth? : an empirical analysis,"
99E23, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Robert Lensink & Hong Bo & Elmer Sterken, 1999. "Does uncertainty affect economic growth? An empirical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(3), pages 379-396, September.
- Lensink, Robert & Bo, Hong & Sterken, Elmer, 1999. "Does uncertainty affect economic growth? : an empirical analysis," CCSO Working Papers 199902, University of Groningen, CCSO Centre for Economic Research.
- Thomas, J. & Worrall, T., 1991.
"Foreign direct investment and the risk of expropriation,"
1991-26, Tilburg University, Center for Economic Research.
- Thomas, Jonathan & Worrall, Tim, 1994. "Foreign Direct Investment and the Risk of Expropriation," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 81-108, January.
- Thomas, J. & Worral, T., 1991. "Foreign Direcyt Investment and the Risk of Expropriation," Papers 9126, Tilburg - Center for Economic Research.
- Thomas, J. & Worrall, T., 1990. "Foreign Direct Investment And The Risk Of Expropriation," The Warwick Economics Research Paper Series (TWERPS) 342, University of Warwick, Department of Economics.
- Thomas, Jonathan & Worrall, Tim, 1990. "Foreign direct investment and the risk of expropriation," Kiel Working Papers 411, Kiel Institute for the World Economy.
- Martin Evans & Paul Wachtel, 1993. "Inflation regimes and the sources of inflation uncertainty," Proceedings, Federal Reserve Bank of Cleveland, pages 475-520.
- Joshua Aizenman & Nancy Marion, 1991.
"Policy Uncertainty, Persistence and Growth,"
NBER Working Papers
3848, National Bureau of Economic Research, Inc.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Linda S. Goldberg & Charles D. Kolstad, 1994.
"Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty,"
NBER Working Papers
4815, National Bureau of Economic Research, Inc.
- Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-73, November.
- Goldberg, Linda S. & Kolstad, Charles D., 1994. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," Working Papers 94-23, C.V. Starr Center for Applied Economics, New York University.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- Ramaprasad Bhar & Shigeyuki Hamori, 2004. "The link between inflation and inflation uncertainty: Evidence from G7 countries," Empirical Economics, Springer, vol. 29(4), pages 825-853, December.
- Lown, Cara & Morgan, Donald P., 2004.
"The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey,"
SIFR Research Report Series
27, Institute for Financial Research.
- Lown, Cara & Morgan, Donald P., 2006. "The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1575-1597, September.
- Hermes, Niels & Lensink, Robert, 2001.
"Capital flight and the uncertainty of government policies,"
Elsevier, vol. 71(3), pages 377-381, June.
- Hermes, N. & Lensink, R., 2000. "Capital flight and the uncertainty of government policies," Research Report 00C30, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- Janeba, Eckhard, 1996.
"Foreign direct investment under oligopoly: Profit shifting or profit capturing?,"
Journal of Public Economics,
Elsevier, vol. 60(3), pages 423-445, June.
- Eckhard Janeba, 1993. "Foreign Direct Investment under Oligopoly: Profit Shifting of Profit Capturing?," Discussion Paper Serie A 420, University of Bonn, Germany.
- Moosa, Imad A. & Cardak, Buly A., 2006.
"The determinants of foreign direct investment: An extreme bounds analysis,"
Journal of Multinational Financial Management,
Elsevier, vol. 16(2), pages 199-211, April.
- Imad A Moosa & Buly A Cardak, 2003. "The Determinants of Foreign Direct Investment: An Extreme Bounds Analysis," Working Papers 2003.02, School of Economics, La Trobe University.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Huang, Ying & Sternquist, Brenda, 2007. "Retailers' foreign market entry decisions: An institutional perspective," International Business Review, Elsevier, vol. 16(5), pages 613-629, October.
- Lahiri, Sajal & Ono, Yoshiyasu, 1998.
"Foreign Direct Investment, Local Content Requirement, and Profit Taxation,"
Royal Economic Society, vol. 108(447), pages 444-57, March.
- Lahiri, S & Ono, Y, 1997. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," ISER Discussion Paper 0438, Institute of Social and Economic Research, Osaka University.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Cushman, David O, 1985. "Real Exchange Rate Risk, Expectations, and the Level of Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 297-308, May.
- Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 493-507, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.