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A special issue of Economies (ISSN 2227-7099).

Deadline for manuscript submissions: 1 May 2025 | Viewed by 15905

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Dr. E. M. Ekanayake

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College of Business and Entrepreneurship, Bethune-Cookman University, Daytona Beach, FL 32114, USA
Interests: international trade; foreign direct investment; economic development; economic growth; tourism; exchange rate volatility
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Special Issue Information

Dear Colleagues,

International financial flows, such as foreign direct investment, play an important role in open economies. Such international financial flows are becoming increasingly important for developing countries given their fragile institutions and financial constraints. However, the situation became even more challenging with the COVID-19 pandemic. For this Special Issue of Economies, we welcome submissions on any topic related to foreign direct investment and investment policy. The purpose of this Special Issue is to collect high-quality, recent research on the different problems related to foreign direct investment, including research pertaining to, but not limited to, the determinants of foreign direct investment, foreign investment and outsourcing, international investment agreements, investment promotion programs, international finance, and investment policy.

This Special Issue welcomes conceptual papers as well as full-length articles on various topics that pertain to foreign direct investment and investment policy. Both empirical and theoretical papers will be considered.

Dr. E. M. Ekanayake
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

foreign direct investment
foreign portfolio investment
international finance
international
investment policy
FDI and international trade
FDI spillovers
determinants of FDI

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Published Papers (9 papers)

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Research

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18 pages, 809 KiB

Open AccessArticle

The Impact of Economic Factors on Saudi Arabia’s Foreign Trade with BRICS Countries: A Gravity Model Approach

by Houcine Benlaria

Economies 2024, 12(11), 305; https://doi.org/10.3390/economies12110305 - 12 Nov 2024

Viewed by 644

Abstract

Our investigation, bolstered by the robust gravity trade model and panel data econometric technique, underscores the pivotal factors that influence trade interactions between Saudi Arabia and the BRICS nations—Brazil, Russia, India, China, and South Africa. The study, spanning from 1998 to 2023, delves into key economic metrics such as the gross domestic product, exchange rate fluctuations, inflationary trends, political conditions, and trade deals. We employ a range of econometric strategies, including pooled Ordinary Least Squares (OLS) and fixed effects models, to reveal that the GDP of BRICS states consistently and significantly impacts trade volumes. Specifically, a 1% increase in the GDP of partner countries correlates with a 0.37% rise in trade volume within the pooled OLS model. This effect amplifies to 1.43% when adjusting for temporal and country-specific factors in the fixed effects, underscoring the importance of accommodating unobserved heterogeneity, which refers to the unmeasured factors that can influence the relationship between GDP and trade volume. The political stability of BRICS nations mitigates transactional risks and promotes more stable trade relationships, thereby enhancing trade flows. Fluctuations in exchange rates exert positive and significant effects. This indicates that a more robust Saudi Riyal, an essential policy instrument, can enhance trade by increasing the competitiveness of Saudi exports. This study demonstrates that economic magnitude, political stability, and exchange rates affect Saudi Arabia’s trade with BRICS nations. These results bolster the Kingdom’s Vision 2030 objectives for economic diversification. This research advocates for stable political climates and strategic trade agreements to enhance trade relations. This study asserts that this approach will guarantee sustainable growth and diminish the Kingdom’s reliance on oil exports, instilling optimism in the Saudi economy. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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18 pages, 308 KiB

Open AccessArticle

Air Transport Resilience, Tourism and Its Impact on Economic Growth

by Chien-Van Nguyen

Economies 2024, 12(9), 236; https://doi.org/10.3390/economies12090236 - 3 Sep 2024

Viewed by 2297

Abstract

The aims of this study are to evaluate the influence of air transport and tourism on economic growth in selected Southeast Asian countries such as Thailand, Philippines, Vietnam, Indonesia, Malaysia, and Singapore in the period 1970 to 2021. The study applies the ordinary least squares (OLS), fixed effects (FEM), and random effects (REM), especially to robustness test of the research results by deploying the DOLS, and IV-GMM regression for endogeneity and autocorrelation analysis. The research results confirmed that air transport has a significant and positive impact on economic growth, especially because the positive impact increased in normal economic conditions and decreased during the COVID-19 pandemic. Therefore, if the air transport recovers, it is likely to boost economic development. In addition, there is no impact of tourism on economic growth. The research results also confirmed the positive impact of foreign direct investment and international trade on the economic growth of Southeast Asian countries; however, there is a negative impact of renewable energy consumption on economic growth. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

16 pages, 695 KiB

Open AccessArticle

Assessing the Economic Impact of IFRS Adoption on Financial Transparency and Growth in the Arab Gulf Countries

by Amer Morshed

Economies 2024, 12(8), 209; https://doi.org/10.3390/economies12080209 - 20 Aug 2024

Cited by 1 | Viewed by 1327

Abstract

This paper examines the impact of adopting IFRS on economic growth and further development in the Arab Gulf countries, with a particular focus on Saudi Arabia, UAE, Qatar, Oman, Kuwait, and Bahrain. It, therefore, answers the research question of how IFRS adoption affects financial transparency, regulatory frameworks, and economic stability in general in oil-dependent economies. Using data from 2010 to 2020, the research uses regression models to test the influence of IFRS adoption on several key economic indicators. The results, thus, indicate that the adoption of IFRS considerably increases the level of transparency and, hence, enables the inflow of FDI as well, therefore ensuring economic growth. This result also sheds light on the critical roles that regulatory solid frameworks and political stability play in amplifying the benefits of IFRS adoption. However, family-based and state-owned enterprises’ resistance to increased demands for transparency is an issue that would provide a challenge. Implications for policy will be such that comprehensive reforms will be required with the countries’ regulatory frameworks, including more transparency and fitting the IFRS guidelines into local business practice and the cultural context. Future studies should also underscore sector-wise impact and go deeper into how cultural and institutional factors impact the effectiveness of implementing IFRS in the Arab Gulf region. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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18 pages, 307 KiB

Open AccessArticle

The Relationship between Trade Openness and FDI Inflows: Evidence-Based Insights from ASEAN Region

by Abdulrahman A. Albahouth and Muhammad Tahir

Economies 2024, 12(8), 208; https://doi.org/10.3390/economies12080208 - 19 Aug 2024

Cited by 1 | Viewed by 1743

Abstract

This research paper focuses on figuring out the impact of trade openness on FDI inflows, which has received relatively less attention in the literature, specifically in the context of ASEAN economies. The ASEAN region, which is relatively more open in terms of both trade openness as well as FDI inflows, is chosen as a sample. Annual data are gathered from “World Development Indicators (WDI)” and “World Governance Indicators (WGI)”. Reported results and findings are based on “Fixed Effect (FE) Modeling”, and the “Generalized Least Square (GLS)” is utilized for the robustness check. The results indicated that trade openness matters significantly for attracting FDI inflows. Similarly, institutional quality has also exerted a positive and significant influence on the inflows of FDI. The disaggregated analysis shows that five aspects of institutional quality, such as rule of law, regulatory quality, control of corruption, voice and accountability, and political instability and absence of violence, have positively and significantly impacted the FDI inflows in the case of selected ASEAN economies. The results demonstrated that exchange rate depreciation is harmful for the inflows of FDI. Moreover, FDI inflows responded positively to market size. Furthermore, the results showed that the impact of natural resources and inflation on FDI inflows is insignificant statistically. The present study suggests that the ASEAN policymakers manage their exchange rate effectively, improve the quality of institutions, and adopt vigorous trade liberalization policies to attract more FDI inflows. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

30 pages, 2849 KiB

Open AccessArticle

Analysis of Albania’s Trade Direction: Is the Open Balkan a New Center of Gravity?

by Glediana Zeneli (Foto), Arsen Benga and Altin Hoti

Economies 2024, 12(7), 176; https://doi.org/10.3390/economies12070176 - 8 Jul 2024

Viewed by 1057

Abstract

Trade is considered one of the main drivers of a country’s economic growth and development. Therefore, a successful analysis that identifies the bilateral trade flows, their determinants, and the regional integration costs and benefits opens new horizons for international trade perspectives. This study examines the effects of new and existing regional agreements on the international trade patterns of Western Balkan countries based on the Albanian case. In this regard, an extended trade gravity model is applied with a panel data set of trade flows between Albania and 43 of its regional strategic partners during the period of 2008 to 2022. This work considers two different similarity indexes to explain the effect of the economic structures of partner countries on their trade volumes: the relative factor endowment and the absolute factor endowment. The first is used to test the Linder Hypothesis, and the latter is used to test the effect of similarity in economic size between trading partners. Empirical results indicate that the effect of the selected explanatory variables, such as transportation costs, economic size, economic strength, exchange rate, and their relative as well as absolute endowment, is within expectations. Unexpectedly, the domestic economic size and strength are found to be insignificant in explaining the import flows and inversely proportional to the exports of Albania. Finally, it is indicated that trade flows are clearly dependent on traditional ties rather than on new incentives like the Open Balkan, which cannot offer a new regional center of gravity. To the best of our knowledge, this is the first time that the gravity of the Open Balkan initiative has been tested for one of the participating countries. The study concludes that while the Open Balkan initiative shows potential, the Berlin Process remains a more reliable path toward EU integration for Albania. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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21 pages, 619 KiB

Open AccessArticle

Impacts of Regional Integration and Market Liberalization on Bilateral Trade Balances of Selected East African Countries: Potential Implications of the African Continental Free Trade Area

by Perez Onono, Francis Omondi and Alice Mwangangi

Economies 2024, 12(6), 155; https://doi.org/10.3390/economies12060155 - 19 Jun 2024

Viewed by 1342

Abstract

This study examined the effect of free trade on intra-African bilateral trade balances for Kenya, Rwanda, Uganda, and Tanzania to assess the potential implications of the African Continental Free Trade area. The four countries have experienced persistent trade deficits. Whether free trade within Africa can improve the national trade balances, and the drivers of bilateral trade balances are important questions for policy and strategic programmes for the countries to make the most gains from free trade area. The econometric model estimated for each country is an extension of the standard Keynesian model of trade balance to include determinants of bilateral trade flows from the gravity model. Quantitative analysis using panel regression was augmented with qualitative data from interviews with trade policy experts and trade officials from various African countries and focus group discussions with small-scale cross-border traders at the Busia and Namanga border posts in East Africa. Findings show that complete tariff elimination on intra–African trade may not impact the bilateral trade balances of Kenya, Rwanda, and Tanzania but could improve bilateral trade balances for Uganda by 6 percent. Within the free trade areas, Uganda’s bilateral trade balances were higher within the Common Market for Eastern and Southern Africa but lower within the East African Community, than outside these areas. Kenya’s trade balances were lower in the Common Market for Eastern and Southern Africa, than otherwise. On the contrary, no significant difference in trade balances is established for the membership of Kenya, Rwanda, and Tanzania in the East African Community; Rwanda in the Common Market for Eastern and Southern Africa; and Tanzania in the Southern African Development Community, when compared to trade balances with non-members. The importance of macroeconomic factors is demonstrated by the increase in bilateral trade balances with higher relative price levels of trade partners; the reduction with increase in relative production and expenditure capacities of trade partners; and improvements following a depreciation of home currency for Tanzania and Uganda, yet a worsening of trade balances in Kenya. A lack of harmony in documents required for cross-border movements within the free trade areas is reported as counterproductive. All African countries should therefore fully implement protocols and cooperate in the harmonization of trade procedures for the free movement of people and goods across borders. Country policies and trade programmes should pursue increased productivity in the leading intra-African export sectors and diversify exports via foreign direct investment in strategic sectors to substitute imports from outside Africa; reduce costs of production; increase the quality of products; and improve transport infrastructure. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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19 pages, 349 KiB

Open AccessArticle

Does Economic Growth Attract FDI Inflows? A Dynamic Panel Analysis

by Pascal L. Ghazalian

Economies 2024, 12(1), 1; https://doi.org/10.3390/economies12010001 - 19 Dec 2023

Viewed by 4535

Abstract

Economic growth is deemed to be a conducive factor in attracting foreign direct investment (FDI) as it often confers location advantage to host countries and fosters business confidence. This paper examines the short-run and the long-run effects of economic growth on FDI inflows. The empirical analysis is conducted through the Generalized Method of Moments (GMM) System estimator for dynamic panel models. The main results show significant positive effects of economic growth on FDI inflows, and they indicate that the magnitudes of these effects are statistically comparable over time and do not diminish with higher economic growth levels. They also reveal important variations in the magnitude of these effects across geo-economic regions and over pertinent economic variables such as economic development level, international trade and foreign investment openness, and endowment in natural resources. These findings underscore the significance of developing growth-enhancing policies that are designed on the basis of the economic and geo-economic characteristics of host countries. Such policies could be coupled with international trade and foreign investment openness directions to stimulate stronger responses of FDI inflows to economic growth and mitigate the implications of unfavorable global and regional political conditions. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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18 pages, 387 KiB

Open AccessReview

Exploring the Dynamic Link Between Trade Openness, External Debt, and Economic Growth in Sub-Saharan Africa: Challenges and Considerations

by Godswill Osuma and Ntokozo Patrick Nzimande

Economies 2024, 12(11), 283; https://doi.org/10.3390/economies12110283 - 24 Oct 2024

Viewed by 927

Abstract

This study investigates the dynamic relationship between trade openness, external debt, and economic growth in Sub-Saharan Africa, focusing on the period from 1990 to 2023. The research examines how trade openness and external debt impact regional economic performance by employing Panel Autoregressive distributed lag (ARDL) techniques utilizing the pool mean group and mean group estimator’s approach. The analysis reveals that while trade openness does not stimulate economic growth, external debt similarly has significant challenges, often hindering long-term development prospects within Sub-Saharan African countries. The findings underscore the importance of managing debt sustainably and aligning trade policies with growth-enhancing strategies. Additionally, human capital and institutional quality are essential endogenous growth factors that significantly influence economic growth in Sub-Saharan Africa. The study recommends that while trade openness alone may not directly drive economic growth, its benefits can be amplified by complementary strategies such as investing in human capital, technological adoption, and industrial policy. The study concludes with policy recommendations to enhance economic resilience and foster sustainable growth, such as attracting foreign direct investment, combined with infrastructure development and sound fiscal management. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

20 pages, 373 KiB

Open AccessReview

The (Political) Economics of Bilateral Investment Treaties—The Unique Trajectory of Brazil

by Christian Bellak and Markus Leibrecht

Economies 2024, 12(6), 130; https://doi.org/10.3390/economies12060130 - 24 May 2024

Cited by 1 | Viewed by 1226

Abstract

Brazil, after signing several traditional Bilateral Investment Treaties without ratifying them, recently shifted towards a different type of bilateral investment agreement, i.e., Investment Cooperation and Facilitation Agreements. Two claims have been made in the literature regarding the transition from traditional Bilateral Investment Treaties to Investment Cooperation and Facilitation Agreements—Claim #1: The non-ratification of the traditional BITs has not harmed Foreign Direct Investment into Brazil, a claim which puts into question the purpose of Bilateral Investment Treaties. Claim #2: While Investment Cooperation and Facilitation Agreements avoid some of the problems of traditional Bilateral Investment Treaties, on balance they are less effective than traditional Bilateral Investment Treaties would have been. We examine the two claims from an empirical economic point of view. We build on the literature about Brazil’s position vis-à-vis Bilateral Investment Treaties, which must be viewed by an amalgamation of (i) a historical legacy; (ii) domestic initiatives, and (iii) a particular U-turn in the political debate. Using empirical evidence on Foreign Direct Investment effects of Bilateral Investment Treaties, the following conclusions emerge: With regard to claim #1, empirical evidence in general as well as specific to Brazil suggests that Brazil has forgone Foreign Direct Investment by not ratifying traditional Bilateral Investment Treaties. Concerning claim #2, while Investment Cooperation and Facilitation Agreements include alternative dispute settlement mechanisms, which aim at a better compliance of states with the Investment Cooperation and Facilitation Agreements’ rules, rather than the compensation of foreign investors, the lower stringency of the State–State dispute settlement mechanism compared to Investor–State dispute settlement mechanism makes Investment Cooperation and Facilitation Agreements less effective. Yet, this weakening effect must be weighed against the effects on Foreign Direct Investment from innovative clauses in Investment Cooperation and Facilitation Agreements, which are absent in many traditional Bilateral Investment Treaties. Full article

(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (2nd Edition))

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