Research on the determinants of economic growth is a common focus area in the economics – both because economic growth is an excellent indicator of well-being and the policy-makers want to know what fact2ors can affect this well-being. Previous literature has identified many factors which contribute to the well-being of a country and among these factors; Foreign Direct Investment is persistently seen. Economists have limited tools to measure well-being; reliance on GDP, GDP per capita, GDP growth rate, Human Development Index (HDI) and other such macroeconomic indicators are often used to measure the well-being of the nation. And it is equally important for the governments and governing bodies to find the factors which can affect these …show more content…
This paper thus will add value to the existing literature and find the impact of FDI particularly on the African countries. The further sections will develop on the existing literature in this regard, the importance and need for this research and the empirical strategy to evaluate the research question.
1.1) Research Rationale
Quantifying the factors which affect economic growth is important for policy-makers and some of these factors have already been identified in the literature. However, the direction of these factors on economic growth is ambiguous and this research will try to find a causal relationship between FDI and Economic Growth using empirical data from African countries. This research will add evidence on the research of economic growth determinants of and allow relevant policy-makers to make policies attracting or deterring FDI depending on the strategy the country wants to pursuit.
1.2) Research Question
The research questions of the paper can be explicitly written down as: what is the impact of FDI on Economic Growth in Developing countries? What are the other factors which affect Economic Growth in Developing countries? It is important to mention here that this research addresses developing countries and the external validity of this research to developed countries is not advocated. To
Before beginning the actual negotiation process you and your spouse should decide when and where to negotiate. You should also make a list of the issues to be negotiated and what information and documents you will both need to bring to the negotiations. Meyer, (n.d)
Propaganda is influencing the attitude of countries and nation’s communities toward some cause or position. There are two different extreme types of systems of government that use propaganda, totalitarian and democracy. In a totalitarian government, this government has power over every aspect of personal and private life. It is an extremely controlling and dictatorial type of government. On the opposite end of the spectrum is the democracy government where the people get to vote for the party they want to rule. This type of government is open and extremely permissive and allows freedom of speech and freedom of the press.
FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)
7. Athukorala, Wasantha, ‘The impact of foreign Direct investment for Economic Growth: A case study in Sri Lanka’, 9th International Conference on Sri Lanka Studies, 092, 2003.
Ajami and BarNiv (1984) attempted to explain the variability of FDI across countries. They emphasized in following determinants of FDI in US: relative size of the US market, change in exports to the US, growth of GNP in the home and host countries, decline in value of the US dollar during the late 1970s, inflation rates in the home and host countries, attractiveness of the US capital markets and research and development and manufacturing as a percent of GNP.
Yousaf (2008) Analyses of more than 3 decades reveal that FDI has positive relation with imports in short & long-run where as relationship with exports is negative in short & positive in the long-run. FDI is an economic influencer of economy of a country specially developing countries experience accelerated GDP when successful in attracting FDI as in case of Pakistan.
In Indian context, the importance of FDI was realized way back in 1948 when emphasis was given on creating domestic base. However, since access to finance was quite limited, the attitude towards FDI was receptive (Kumar, 2004). Since then there was a debate over the necessity of FDI and Government of India in the 1980s cautiously went on deregulation of industries. However, after the adoption of liberal investment policy under economic reforms in 1991 resulted in attraction of more FDI inflow to the country. In recent times, FDI inflow to India increased by 17.1 percent in 2005, which is 5.8 percent of GDP of the country.
The FDI & FII mantra is considered an all-purpose panacea for the ills of the Indian economy and society. It has become routine for our finance ministers to "showcase" India in various international forums and exhort the global captains of industry and commerce to come to India. We here want to know about the far-reaching implications of FDI in our economy and, particularly, how it can stifle economic growth.
This can be measured by the following formula; Per capita nominal GDP = Nominal GDP / Population, Per capita real GDP = Real GDP / Population. Seven factors determine economic growth. Natural resources such as land, mineral deposits, waterways; climatic conditions provide an essential foundation to economic growth. Combined with the other resources of capital, labor and enterprises, natural resources can be developed and organized to increase the productive capacity if the nation. Consequently the quality and size of the labor force is a major determinant of economic growth. Education and vocational training are essential the growth potential of a nation. The promotion of education and job training schemes increase the knowledge, skills and flexibility of the workforce that contributes to potentially higher levels of productivity and efficiency. Whether from natural increase or immigration population growth can cause a higher level of economic growth. An increasing population requires increased public spending on housing, education and other social needs while businesses expectations of
The objective of this paper is to analyze the effectiveness of foreign aid flows to certain sectors in attracting FDI. This is done from both a theoretical and an empirical point of view, starting from the broad focus of comparing physical capital and complementary factors of production and then narrowing the focus to economic and social aid. The main
Economists believe that Foreign Direct Investments is an essential part of economic evolution in every country. There are many academic papers that attempt to assess FDI aspects. Despite many researchers have tried to give an accurate explanation to FDI, there is no comprehensively approved theory. FDI motivations have been mainly researched by John Dunning, Stephen Hymer, Raymond Vernon, etc.
Analyse the main exogenous (FDI) and endogenous (entrepreneurship) policy prescriptions used in economic development policy and identify areas (and potential policies) through which these may be used together to improve economic performance.
The world is becoming a global village from the rapid introduction of technology; there should be a need to understand the relationship between foreign investors and the economy. Foreign investors and its impact on the economic growth of a country cannot be over emphasized. A way by which it affects the economy is through the foreign direct investment. Foreign direct investment is defined not only as the transfer of money, but also a mixture of financial and intangible assets such as technology, managerial capability, marketing skills, and other assets (Nahide & Badri, 2014). In various economies they have regulations guiding the actions of foreign investors, but their impact are still felt on the economy, especially the developing countries. It assists in creating employment opportunities as well as improving the Gross Domestic Product (GDP) of the economy. Recently, there has been an increased attention to foreign direct investment; this proves the fact that it’s seen as the main factor of economic growth (Camelia, 2013). Despite the barrier to foreign investment, it has a positive impact on the economic growth of a country.
As per the conducted research, the FDI will enable the under developing nations to grow faster. In the year 2011, the inflow of FDI in India has been able to reach the level of $11.1billion, which is also considerable as a drastic change in the economic activities. FDI inflow and Globalisation has influenced the average GDP rate of countries and the same influenced gradually.
International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can, therefore, grow more efficiently and can more easily become competitive economic participants. For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. These raise employment levels, and, theoretically, lead to a growth in the gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.