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Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia

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  • Arazmuradov, Annageldy

Abstract

This paper is about relationship between official development assistance, foreign direct investment and domestic investment in landlocked and less studied young economies of Central Asia. It is important for donor countries to understand whether their investments induce foreign direct investment or vise versa. If so, it creates ground for public-private partnership. If not, then it points of reassessing mechanisms of aid architecture. For public multinational enterprises is important to gain public opinion and further explore new markets. For governments it is crucial to devise policies to favor foreign transfers that bring better welfare improvements. Our results from seemingly unrelated regression for total regional sample demonstrate that (1) foreign aid and FDI are related. (2) we found crowding out effect: domestic investments decrease foreign aid inflows inelastically though. However, on country level these results are different. We conclude that there is an indication for public-private investment partnership.

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  • Arazmuradov, Annageldy, 2011. "Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia," MPRA Paper 36881, University Library of Munich, Germany, revised 23 Feb 2012.
    • Handle: RePEc:pra:mprapa:36881
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    Cited by:

    1. Sharofiddin Ashurov & Anwar Hasan Abdullah Othman & Romzie Bin Rosman & Razali Bin Haron, 2020. "The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)," Russian Journal of Economics, ARPHA Platform, vol. 6(2), pages 162-176, June.
    2. Adeel Ahmad DAR & Taj MUHAMMAD & M. Wasif SIDDIQI, 2020. "Bureaucratic Quality and FDI Inflows Nexus: A South Asian Perspective," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 149-168, September.
    3. Liao, Hongwei & Chi, Yedi & Zhang, Jiarui, 2020. "Impact of international development aid on FDI along the Belt and Road," China Economic Review, Elsevier, vol. 61(C).
    4. Moheddine Younsi & Marwa Bechtini & Hasna Khemili, 2021. "The effects of foreign aid, foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities," African Development Review, African Development Bank, vol. 33(1), pages 55-66, March.
    5. Kechagia, Polyxeni & Metaxas, Theodore, 2016. "FDI in Central Asia: Uzbekistan," MPRA Paper 71326, University Library of Munich, Germany.
    6. Liu, Ailan & Wang, Zhixuan & Zhu, Pengcheng, 2021. "Does informal economy undermine the effects of China’s aid on its outward foreign direct investment?," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 315-329.
    7. Dong, Yan & Fan, Cijun, 2017. "The effects of China's aid and trade on its ODI in African countries," Emerging Markets Review, Elsevier, vol. 33(C), pages 1-18.

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    More about this item

    Keywords

    Central Asia; transition economies; foreign direct investment; official development assistance;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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