IDEAS home Printed from https://ideas.repec.org/a/bdy/modfin/v2y2024i1p1-17id87.html

Foreign direct investment and economic growth in developing countries: The role of international trade and foreign debt

Author

Listed:
  • Simon Okaja Epor

  • Henry Yua

  • Paul Terhemba Iorember

Abstract

The existing literature is sparse on the role of international finance in modeling the FDI-growth nexus. This study integrates the role of international trade and external debt in the FDI-economic growth nexus for Brazil, Nigeria, and Vietnam. We apply the Autoregressive Distributed Lag (ARDL) model to annual data covering the period 1990-2021. The results show that FDI and trade have positive but insignificant effects on economic growth in all three countries. In addition, our results show that external debt hampers long-term economic growth in these countries. Based on the results, we propose country-specific recommendations that take into account specific economic and financial conditions, global market dynamics, and the long-term development goals of developing countries.

Suggested Citation

  • Simon Okaja Epor & Henry Yua & Paul Terhemba Iorember, 2024. "Foreign direct investment and economic growth in developing countries: The role of international trade and foreign debt," Modern Finance, Modern Finance Institute, vol. 2(1), pages 1-17.
    • Handle: RePEc:bdy:modfin:v:2:y:2024:i:1:p:1-17:id:87
    as

    Download full text from publisher

    File URL: https://mf-journal.com/article/view/87
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Syed Raza & Syed Jawaid, 2014. "Foreign capital inflows, economic growth and stock market capitalization in Asian countries: an ARDL bound testing approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 375-385, January.
    2. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    3. Trang Thi-Huyen Dinh & Duc Hong Vo & Anh The Vo & Thang Cong Nguyen, 2019. "Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries," JRFM, MDPI, vol. 12(4), pages 1-11, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohamad Alnafissa & Mohammed Abdeen & Kamaleldin Bashir & Yosef Alamri & Fuad Alagsam & Abdulaziz Al-Duwais, 2022. "Impact of Gulf Cooperation Countries’ Foreign Direct Investment on Sudan’s Agricultural Exports," Sustainability, MDPI, vol. 14(6), pages 1-8, March.
    2. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO.
    3. Kar, Sabyasachi & Pritchett, Lant & Raihan, Selim & Sen, Kunal, 2013. "Looking for a break: Identifying transitions in growth regimes," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 151-166.
    4. Shahbaz, Muhammad & Song, Malin & Ahmad, Shabbir & Vo, Xuan Vinh, 2022. "Does economic growth stimulate energy consumption? The role of human capital and R&D expenditures in China," Energy Economics, Elsevier, vol. 105(C).
    5. Sayef Bakari, 2019. "Do Agricultural Raw Materials Imports Cause Agricultural Growth? Empirical Analysis from North Africa," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 4(2), pages 65-77.
    6. Czeglédi, Pál, 2009. "A tulajdonjogi biztonság szerepe a technológia elterjedésében [The role of property-law security in the spread of technology]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 790-813.
    7. Vos, Rob & Frenkel, Roberto & Ocampo, José Antonio & Palma, José Gabriel & Marfán, Manuel & Ros, Jaime & Taylor, Lance & Correa, Nelson & Cimoli, Mario, 2005. "Beyond Reforms: Structural Dynamics and Macroeconomic Vulnerability," IDB Publications (Books), Inter-American Development Bank, number 347, March.
    8. Justina Banioniene & Lina Dagiliene, 2017. "Opportunities to Catch Up Advanced Countries by Investing in Technologies," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 13(1), pages 111-123.
    9. Motoyama, Yasuyuki & Cao, Cong & Appelbaum, Richard, 2014. "Observing regional divergence of Chinese nanotechnology centers," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 11-21.
    10. Justin Lin & Peilin Liu, 2006. "Economic Development Strategy, Openness and Rural Poverty: A Framework and China's Experiences," WIDER Working Paper Series RP2006-43, World Institute for Development Economic Research (UNU-WIDER).
    11. Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December.
    12. Shabari Paul Dey & Debasis Neogi, 2015. "Testing Sigma and Unconditional Beta Convergence of GDP for SAARC Countries: Can Inclusion of China further Consolidate the Convergence?," Global Business Review, International Management Institute, vol. 16(5), pages 845-855, October.
    13. Ozili, Peterson K, 2024. "Impact of foreign direct investment inflows on economic growth in Nigeria," MPRA Paper 122167, University Library of Munich, Germany.
    14. Andres Rodriguez-Clare, 1996. "The role of trade in technology diffusion," Discussion Paper / Institute for Empirical Macroeconomics 114, Federal Reserve Bank of Minneapolis.
    15. Fernando Mayoral & Carlos Garcimartín, 2013. "The impact of population on the reduction of steady-state disparities across Spanish regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 49-69, February.
    16. V. Vandenberghe, 2018. "The Contribution of Educated Workers to Firms’ Efficiency Gains: The Key Role of Proximity to the ‘Local’ Frontier," De Economist, Springer, vol. 166(3), pages 259-283, September.
    17. Wang, You & Gong, Xu, 2020. "Does financial development have a non-linear impact on energy consumption? Evidence from 30 provinces in China," Energy Economics, Elsevier, vol. 90(C).
    18. Mohammad I. Elian & Nabeel Sawalha & Ahmed Bani-Mustafa, 2020. "Revisiting the FDI–Growth Nexus: ARDL Bound Test for BRICS Standalone Economies," Modern Applied Science, Canadian Center of Science and Education, vol. 14(6), pages 1-1, June.
    19. Vivian Nasrulddin, 2024. "Prospects of Post-Conflict Foreign Direct Investments in Ukraine Through the Lens of Dunning’s Eclectic Paradigm," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(6), pages 1-43, June.
    20. Irwan Shah Zainal Abidin & Nor Aznin Abu Bakar & Muhammad Haseeb, 2014. "An Empirical Analysis of Exports between Malaysia and TPP Member Countries: Evidence from a Panel Cointegration (FMOLS) Model," Modern Applied Science, Canadian Center of Science and Education, vol. 8(6), pages 238-238, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdy:modfin:v:2:y:2024:i:1:p:1-17:id:87. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Adam Zaremba (email available below). General contact details of provider: https://mf-journal.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.