Fayyaz Ahmad

A Novel Study on OFDI and Home Country Exports: Implications for the ASEAN Region

Purpose - This study examines the effects of outward foreign direct investment (OFDI) on the home country exports for selected ASEAN countries during 1981-2013. Design/methodology/approach - We have used OLS regression based on the unit root analysis, correlation technique and a series of specification tests applied to annual time series data. Findings - The results reveal that the complementary effects of OFDI on exports of the home country outweigh the substitution effects for four ASEAN countries. Furthermore, trade openness, currency fluctuations and inward FDI are also important factors for progressive home country exports. Originality/value - This study provides a thorough analysis of the links between OFDI and exports of the home country on a macro level. With a data set of more than three decades from the ASEAN region, this study is the first attempt of its kind to analyze the relationship of these two variables on the aggregate level.

Causality between Foreign Portfolio Inflows and Economic Growth: Evidence from China and India

The objective of this paper is to examine the causal relationship of foreign portfolio inflows and economic growth for two Asian economies, i.e. China and India. We have used Granger causality test for both countries’ data ranging from 2001 to 2013 and concur with the findings of Durham (2003) and Duasa and Kassim (2009), i.e. there is no direct causality between foreign portfolio inflows and economic growth. Our results also suggest an indirect relationship between foreign portfolio inflows and economic growth of China and India.

Causality nexus of exports, FDI and economic growth of the ASEAN5 economies: evidence from panel data analysis

ABSTRACT This paper analyzes the causal relationships between exports, FDI and economic growth among the ASEAN5 countries. We have used a three-stage procedure based on unit root, co-integration and causality tests applied to the panel data from 1981 to 2013. The results reveal that there is a bi-directional causal relationship between FDI and growth in the long run, while there is a unidirectional causal relationship from FDI to exports in the short run. Our results also confirm that the export-led growth (ELG) and FDI-led growth hypotheses hold true in the long and short run. To reinforce the FDI inflows, authorities should continue the progressive reduction of barriers, and increase the sophistication of quality exports to compete in the global market. This paper is the first of its kind to analyze the role of both FDI and exports in the ASEAN5 economies using panel analysis.

Foreign Portfolio Inflows and Economic Growth: Evidence from ASEAN5

The aim of this study is to examine the causal relationship between foreign portfolio inflows (FPI) and economic growth of ASEAN5. We have used the data of FPI, GDP and FDI from 2001 to 2013 to determine the impact of FPI on the economy. The results of Granger causality and M-Wald test reveal interesting facts about the ASEAN5. The empirical analyses suggest that a significant relationship exists between FPI and the economic growth of ASEAN5, except for Singapore. The results also indicate a positive impact of FDI on economic development, in particular, for Singapore, Indonesia and Malaysia.

China's Economic Development: Does the Exchange Rate and FDI Nexus Matter?

This study aims to investigate the relationship between China’s exchange rate, foreign direct investment (FDI) inflows and economic development. We applied the bound testing approach on aggregate level data from 1981 to 2013. The results showed that the Chinese economy benefitted from a lower exchange rate over this period, and that there was a direct link between FDI inflows and economic development on an aggregate level both in the long and short run. The results of the Granger causality test identified a long and short run association among these variables. The GMM estimations with dummies for financial crises and RMB exchange rate policy fluctuations also confirmed the growth enhancing impact of the exchange rate and FDI inflows. To promote sustainable economic development in the future, China should focus on improving the levels of domestic investment and human capital, as well as supervising the level of openness and capital controls.

Exchange Rate, Economic Growth and Foreign Direct Investment in Emerging Asian Economies: Fresh Evidence from Long Run Estimation and Variance Decomposition Approach

This paper investigates the potential relationship between exchange rates, economic growth and foreign direct investment (FDI) for emerging Asian economies. We tested a long run relationship through the ARDL bounds testing approach and the robust regression function which incorporated financial development, capital, openness and trade balance as the additional variables of our model. The findings confirm that exchange rate depreciation affects the volume of FDI and promotes growth in the long run. Economic development and inflows are also associated with exchange rates. The causality test also suggested a long run interdependent link between these three macroeconomic factors. The results of the variance decomposition method suggest that the findings are robust and reliable.

The Nexus between Exchange Rate, Exports and Economic Growth: Further Evidence from Asia

The economic development of developing countries has been associated with their exports, and the evidence suggests that exchange rates influence the exports. We used the panel data to investigate potential Granger causality among the GDP, exports and exchange rates in Asian Countries over the period 1970-2009. We found that the exchange rate and exports nexus holds for Export-led Growth (ELG) and Growth-led Exports (GLE) hypotheses in the long and short run. We used the Wald test under VECM with all necessary specifications tests to identify the possible nexus of our variables. Additionally, we applied the Generalized Method of Moment (GMM) with control variables. The results imply that an undervalued currency enhances exports and a strong currency has a significant impact on economic development. Our results suggest that a timely and balanced policy is very import for the improvement of exchange rates, exports and economic growth nexus in the long term.

Do External and Internal Crises Affect Foreign Portfolio Inflows? The Case of China and India

This study examines the relationship between external and internal crisis (EIC) and Foreign Portfolio Investment (FPI) net inflows in China and India. We have applied Binary Choice Model taking the EIC as a dummy variable. GDP growth is an independent variable in our model that indicates the combined performance of economic sectors. The results suggest that EIC exert a significant impact on the FPI net inflows, but the nature of internal issues is different for both countries. We find a little association between GDP growth and net FPI inflows.

Causality Nexus of Exports, FDI and Economic Growth: A Panel Data Analysis of the ASEAN Region

This paper analyzes the causal relationships between exports, FDI and economic growth among the ASEAN5 countries. We have used a three-stage procedure based on unit root, co-integration and causality tests applied to the panel data from 1981 to 2013. The results reveal that there is a bi-directional causal relationship between FDI and growth in the long run, while there is a unidirectional causal relationship from FDI to exports in the short run. Our results also confirm that the export-led growth (ELG) and FDI-led growth hypotheses hold true in the long and short run. To reinforce the FDI inflows, authorities should continue the progressive reduction of barriers, and increase the sophistication of quality exports to compete in the global market. This paper is the first of its kind to analyze the role of both FDI and exports in the ASEAN region using panel analysis.

Does OFDI Affect Economic Growth? Evidence from Cross-Country Regression and Time Series Analysis

The purpose of this study is to examine the impact of Outward Foreign Direct Investment (OFDI) on economic growth. Two econometric approaches are applied: cross-country regression for the sample of the selected ASEAN countries and a time series approach for China. Both approaches suggest that OFDI has a negative impact on economic growth. Several specifications and estimations techniques confirm that our findings are robust. In addition, the Granger causality test indicates unilateral causality from OFDI to GDP. Thus, the result specifies that increasing investment abroad decrease domestic growth. Most of the previous studies primarily focused on production, employment and exports in relation with outward investment on a firm level. This paper, in contrast, focuses on the aggregate impact of outward investment on economic growth of selected ASEAN countries. This analysis covers a period of more than three decades.