Causal Nexus Between FDI Inflows and Its Determinants in SAARC Countries

South Asia Economic Journal Pub Date : 2020-08-24 DOI:10.1177/1391561420940838

Sushil K. Rai, Akhilesh K. Sharma

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引用次数: 5

Abstract

This article aims to understand the drivers of foreign direct investment (FDI) inflows and its nexus with its determinants such as economic growth, inflation rate, labour productivity, infrastructure development, market size, openness of the economy, political stability and corporate tax for South Asian Association for Regional Corporation (SAARC) countries. The article is based on secondary data from the World Bank and International Labour Organization (ILO) for 19 years from 2001 to 2018 for 6 SAARC countries, viz. Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. The findings indicate that there exists long-run, short-run and joint causal relationship among infrastructure development, market size, openness of the economy, political stability and corporate tax and FDI inflows. Among these variables, the corporate tax is the most important one because it shows bidirectional causality with FDI inflows in the long run as well as short run along with joint strong causality. However, only the coefficients of infrastructure development and corporate tax were found to be positively and negatively significant, respectively. Therefore, better infrastructure development and decrease in corporate tax may enhance FDI inflows in SAARC countries. This infers that with the decrease in corporate tax, more FDI inflows may take place, and higher FDI inflows may decrease in corporate tax further. Therefore, this article suggests that SAARC countries should accelerate the process of integration of their economy with the rest of the world along with political stability, enhance the infrastructure facility and reduce the corporate tax to get the higher FDI inflows. JEL: F21, F02, C22

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南盟国家FDI流入及其决定因素的因果关系

本文旨在了解外国直接投资(FDI)流入的驱动因素及其与南亚区域公司联盟(SAARC)国家的经济增长、通货膨胀率、劳动生产率、基础设施发展、市场规模、经济开放程度、政治稳定和企业税收等决定因素的关系。这篇文章基于世界银行和国际劳工组织(ILO) 2001年至2018年19年间对6个南盟国家的二手数据，即孟加拉国、不丹、印度、尼泊尔、巴基斯坦和斯里兰卡。研究结果表明，基础设施发展与市场规模、经济开放程度、政治稳定、公司税和FDI流入之间存在长期、短期和联合因果关系。在这些变量中，公司税是最重要的一个变量，它与FDI流入在长期和短期都表现出双向因果关系，并具有联合强因果关系。然而，只有基础设施发展系数和公司税系数分别具有正显著和负显著意义。因此，更好的基础设施建设和企业税的减少可能会增加南盟国家的FDI流入。这可以推断，随着公司税的降低，可能会有更多的FDI流入，而更高的FDI流入可能会进一步降低公司税。因此，本文建议南盟国家应加快经济与世界其他地区的一体化进程，同时保持政治稳定，加强基础设施建设，降低公司税，以获得更高的FDI流入。Jel: f21, f02, c22

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

South Asia Economic Journal Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.10

自引率

0.00%

发文量

期刊介绍： The South Asian nations have progressively liberalized their economies in recent years in an effort to integrate with the world economy. They have also taken steps to enhance multilateral and regional economic integration. Even though the South Asian economies have grown at an average rate of more than 5 per cent over the last few years, roughly 40 per cent of their people still live below the poverty line. Hence, the South Asian region continues to face many challenges of economic and social development. The South Asia Economic Journal (SAEJ) is designed as a forum for informed debate on these issues, which are of vital importance to the people of the region who comprise one-sixth of the world’s population. The peer-reviewed journal is devoted to economic analysis and policy options aimed at promoting cooperation among the countries comprising South Asia. It also discusses South Asia’s position on global economic issues, its relations with other regional groupings and its response to global developments. We also welcome contributions to inter-disciplinary analysis on South Asia. As a refereed journal, SAEJ carries articles by scholars, economic commentators,policy-makers and officials, from both the private and public sectors. Our aim is to create a vibrant research space to explore the multidimensional economic issues of concern to scholars working on South Asia. Among the issues debated in relation to South Asia are: - the implications of global economic trends; - the issues and challenges by WTO; - approaches to industrialization and development; - the role of regional institutions such as the SAARC; - the relationship between SAARC and other regional economic groupings such as ASEAN; - the implications of economic liberalization for trade and investment in the region; - new initiatives that can be launched to enhance economic cooperation among the South Asian countries both on a bilateral and a regional basis.