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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.

Suggested Citation

  • 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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    Keywords

    Central Asia; transition economies; foreign direct investment; official development assistance;

    JEL classification:

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

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