Article Foreign Direct investment, domestic investment, and economic...

http://www2.ku.edu/~econ/people/documents/Kamara_2013_000.pdf

https://file.scirp.org/pdf/TEL_2016082413402736.pdf

Positive economic effects seem to appear, with the exception of human capital development, but this is reasonable.

Thank you Stephen for the links.

Sure my colleague, it is mutual interaction...

Yes, foreign investments are a part of a country's GDP and has a huge impact on the state of the Indian economy. ... Now since GDP refers to all economic transactions done within a country, FDI is most definitely included as part of GDP – as these economic transactions can be both domestic and international.

Thank you dear Gulbir for your ideas.

Yes, foreign direct investment inflows big affect indirectly gross domestic product.

Certainly, unless the country provides investment facilities

There's no single consensus. However, larger FDI inflows are generally expected to positively impact on GDP. You can research on the reasons why the unconventional situation might be possible in some economies.

Thank you dear Stephen, you are right.Some studies indicated positive impact while others showed negative impact.

Niyungeko Antoine Seems to have no greater impact on human capital development, dear Niyungeko Antoine; in this case, it will not work without public policy initiatives, like ppp

(private public partnerships).

Dear Stephen I. Ternyik, thank you for your ideas. I have to say that there is no consensus on economic growth model as pointed out by Christian (2010). before concluding, it is better to make specific analysis as there is "no one size fit all" in the process on development.

Yes. FDI inflows affect GDP indirectly by influencing other factors of growth like capital formation and trade. But this is mainly experienced by developed countries or countries that have experienced high growth levels.

It also depends the technology intensity of FDI. For instance, if FDI contribute to learning by doing, it is possible to affect growth. Technological content of FDI could be seen as a significant determinant for growth.

Hi

I think the effect can be direct

It certainly does

I think we all in agreement that FDI positively affects GDP. It is like injecting fresh blood. Hopefully, it strengthens the body so that it can perform even better. FDI affects GDP through its components. FDI definitely increases investment spending (I). This investment improves production of goods and services which in turn increase consumption both domestic and abroad (C & E). And eventually, it also increases government spending (G) through tax.

However, researchs came up with mix results. Negative impacts apparently come from countries where investment regulations are weak. Here, instead of strengthening the economy, FDI weakens it by competing with local establishments for raw materials, labor and market.Thus, investment regulations need to be strengthened to direct FDI where it is really needed.

Dear Mr. Yudhi, thank you for your ideas. You are right. Constrat results were found, some talked about the risk of depending on the technology brought by FDI, others talked about corruption, others talked about the fact that local companies fail to compete,and then close the doors,ect.

Paul: Yes, the inflow of investment from foreign sources will indirectly have a positive effect on a nation's Gross Domestic Product (GDP).

When a foreign company builds a factory or warehouse or call center in your country, then it creates jobs and also requires suppliers and second level jobs.

There may even be thrid and fourth level jobs affected.

Thank dear Dr. Paul for ideas.

Dear Niyungenko, in addition to the quantitative analysis at a macroeconomic level, it could be useful to include a couple of country case studies (and some specific sectors or industries), in order to better understand with more detail the interactions and local effects of FDI considering the policy and institutional frameworks. Case studies of Ireland and Costa Rica could be helpful examples of possible approaches for your region of interest study. Best.

FDI impacts on the GDP is direct. When such fund is injected into the economy, it impacts the economy directly. It can equally have some indirect effects when considering its impacts on human capital development and infrastructure development.

There is no doubt that FDI impacts GDP directly. The multiplier effect of increased incomes alone stimulates growth in many ways(employment, training & technology). Indirectly, FDI impacts GDP through investment stimulation.

Dears Dr.Lui,Uche and Uche,

thank you for your comment on the impact of FDI on GDP. I was interested in indirect effect or mediation analysis considering some variables as mediators. The result shows the multiplier effect /indirect effects of FDI on GDP in the region. That means FDI transfers impact on GDP through other mediator variables.

Best

Antoine

Dear Niyungeko Antoine ,

good question ....

not only does FDI have an effect on GDP, it actually has a DIRECT effect on GDP - that is why countries strive so hard to attract foreign investors.

Not only that FDI creates jobs, but those jobs (salaries) have an economic multiplication effect (it is like a snowball effect - more jobs create salaries --> spending salaries, creates even more jobs and even more spending etc.)

Kind regards,

Dear Prof Dr Sanel Halilbegovic , I appreciate your contribution. The existing literature does not show answer the how question and does not quantify such indirect effects of FDI. Mediation analysis used in the analysis allows to confirm such reality.

Best

Antoine

A reason why the research provides contrasting results is that not all FDI is the same nor are host countries the same. If FDI introduces new commercial activity that was previously not there or if it elevates the value of existing industry then GDP will rise. If on the other hand it has the effect of merely supplanting a fairly competitive local industry and displaces local firms on the basis of access to cheaper imported inputs the overall impact on GDP might be negative as the local firms are forced to shut down. A further factor is whether the FDI increases the exporting capability or reduces the importing propensity of the host country in which case GDP may rise.

Also directly, both.

Dear Niyungeko,

The initial question is banal -- of course, any productive investment increases GDP. The real question also applicable to your region of interest -- does FDI increase National Income (wages plus profits plus depreciation)? Here you may get very unexpected results and significantly contribute to IB literature.

The relationship is endogenous.

Thank you dear Dr. Sule for your point of view .

Thank you Dr. Jaroslav for your example. Many economies will decline because FDI is predicted by the World Investment report 2020 to fall in many countries. For instance, all variables of the equation of GDP are correlated to FDI in Sub-Sahara, that implies the fall of FDI will reduce Household consumption, exports, imports, gross capital formation, govermnent expediture,etc. Countries should prepare on how to deal with the issues.

Best

Niyungeko Antoine Global FDI may fall, but remember that Africa's current FDI pattern is quite different from other parts of the world. Chinese investment in Africa seems to be insulated from global shock due to the political agenda associated with these investments. The 2019 investment report shows a decline in global FDI, but Africa experiences an increase.

So in your modeling, don't forget to account for the different sources of FDI and its associated motives.

Again FDI in Africa by China and middle east countries are mostly done by the state organization, so the effect can be different

Thank you Dr. Vincent for your valuable points.

The relationship between FDI and economic growth can be mixed, in fact. It might be an assistance.

"Almfraji, M.A. and Almsafir, M.K., 2014. Foreign direct investment and economic growth literature review from 1994 to 2012. Procedia-Social and Behavioral Sciences, 129, pp.206-213."

Dear Abul Kalam Azad, thank you for your contribution to this discussion. Prior studies have shown mixed effects (positive and negative) of FDI on GDP .

The indirect effect of foreign direct investment could result from various types of spillovers in the host country, such as technology diffusion, imitation, knowledge spillovers, and workforce upgrades. If such effects are present, foreign direct investment contributes to the gross domestic product of the host country not only via the activities of the foreign affiliates but also by improving the performances of the indigenous firms. The existence and the extent of positive effects are likely dependent on the absorptive capacities of the host-country indigenous firms. For example, this means that we could expect less pronounced effects in Sub-Saharan Africa than in countries such as China.

Dear Dr. Radovan, thank you for your time and valuable contributions to the topic. I agree with you.

Best

The result of the analysis confirms the existence of direct effect ignoring how the effected was generated through some other variables. ... They concluded on the positive effect of foreign direct investment inflows on gross domestic product without considering the possible indirect effect.