The importance of mediator variable analysis relies on providing a better understanding of the mechanism by which a cause (independent variable) has an effect on a result (dependent variable).Mediation explains how an independent variable (X) affects a dependent variable (Y) through one or more interacting variable(s) or mediator variable(s) (M) and the direction of this effect (Özdil & Kutlu, 2019).
To analyze the mediating effects of house hold consumption (HHC) in the relationship between gross domestic product (GDP) and foreign direct investment inflows (FDI) in 28 low and low-income African countries, data related to GDP, FDI and HHC was collected for 2017 period. Using Bootstrap method, the result shows a statically significant direct effect of FDI on GDP (path C) 13.989. However, when controlling for mediator variable (HHC), the direct effect of FDI and on GDP is reduced, and becomes not statically significant (path c') 2.064. The indirect effects become statically significant 11.925 suggesting mediation effect of HHC in the relationship between GDP and FDI. Therefore, low and low-income African countries should stimulate an increase in foreign direct investment to boost their gross domestic product.
Formula: Y = C + I + G + (X – M); where: C = household consumption expenditures / personal consumption expenditures, I = gross private domestic investment, G = government consumption and gross investment expenditures, X = gross exports of goods and services, and M = gross imports of goods and services.
https://books.google.com.sa/books?id=TdIoDAAAQBAJ&pg=PA221&lpg=PA221&dq=household+consumption+Mediates&source=bl&ots=cYbB-ACA_P&sig=ACfU3U25nvFlQzxX4J9KTG4fGIoaSjvsaQ&hl=ar&sa=X&ved=2ahUKEwi9sq6mx-vpAhWOxoUKHQY2A30Q6AEwAXoECAkQAQ#v=onepage&q=household%20consumption%20Mediates&f=false
I think that low-income countries need to stimulate the growth of foreign direct investment in order to increase gross domestic product.
Dear Mutasem, thank you for the equation of Y. However, the study analysis how FDI effects GDP through house hold consumption. Remember all the money from foreign investors is not invested in fixed asset like equipement, land, production tools,etc. there is a part of it paid in salaries and wages. THe increase in salaries and wages increases demand, and this increases the production,etc. The equation allow to analyze direct effect effect without considering the increase in house hold consumption, it is like a vicious cycle.
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I agree with Mr. Mutasem Z. Bani-Fwaz since the result of direct investment is of great importance, and in this formula it clearly shows the relationship between its components
Mutasem Z. Bani-Fwaz, has provided a simple and detailed analogy for the relationship. In addition, the simple circular flow of income in open economy necessitate that income flows through the interactions among the economic agents (household, firm, government and the external economy). Niyungeko Antoine, thus; increases in the household consumption ought to be captured provided that such consumption is actually income induced and not necessarily autonomous since it's expected that income must flow from the firm (which perhaps might be directly influenced by FDI) to the household for at least the aggregate of labor supply.
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