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Research methods in economics and its implications for capital formation

Author

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  • Waqar Ameer
  • Helian Xu
  • Kazi Sohag
  • Musaad Mansoor Halwan
  • Azka Amin

Abstract

We explore whether public or private capital augments or obstruct Foreign Direct Investment (FDI) inflows by decomposing Domestic Capital Formation (DCF) into private and public capital formation. To this end, we apply Cross-Sectional Autoregressive Distributed Lags (CS-ARDL) approach to analyze panel time-series data. Our empirical results show that public capital crowds in FDI inflows while private capital crowds out FDI inflows. However, institutional quality significantly attracts FDI inflows for less developing economies. We argue that private and public capital possess different attributes; thus, clubbing them together might result in aggregation bias. We observe a strong connection of good institutional quality with private and public capital to augment foreign capital inflows for developing countries in the long run. Besides, our empirical results suggest that returns are high with quality institutions, especially for developing regions. Our result estimations provide several policy implications.

Suggested Citation

  • Waqar Ameer & Helian Xu & Kazi Sohag & Musaad Mansoor Halwan & Azka Amin, 2022. "Research methods in economics and its implications for capital formation," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 5536-5555, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:5536-5555
    DOI: 10.1080/1331677X.2022.2030244
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