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Estimating relationships among foreign direct investment, governance quality, and economic growth in developing countries using the threshold auto‐regressive model

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  • Yosra Saidi
  • Anis Ochi

Abstract

This study examines the triangular relationship between foreign direct investment (FDI), economic growth, and governance quality for 102 developing countries over the period 2000–2018. Compared with the work carried out until now, the novelty of this research lies in using the panel threshold regression (PTR) model to determine the optimal level of governance quality, which, once attained, will make economic growth increase with FDI inflows. We found that the nexus between these three variables is nonlinear. Besides, results show that there is no significant relationship between FDI and economic growth below the threshold level of −1.20 for global governance index (GGI). The results showed that the positive and significant effect of FDI inflows on economic growth begins to manifest once the GGI exceeds this threshold of −1.20. Several policies are proposed and discussed. Este estudio examina la relación triangular entre la inversión extranjera directa (IED), el crecimiento económico y la calidad de la gobernanza en 102 países en desarrollo durante el periodo 2000–2018. En comparación con los estudios realizados hasta ahora, la novedad de esta investigación radica en la utilización del modelo de regresión de panel por umbral (PTR, por sus siglas en inglés) para determinar el nivel óptimo de calidad de la gobernanza que, una vez alcanzado, hará que el crecimiento económico aumente con los influjos de IED. Se descubrió que el nexo entre estas tres variables no es lineal. Además, los resultados muestran que no existe una relación significativa entre la IED y el crecimiento económico por debajo del nivel umbral de −1,20 para el índice de gobernanza global (GGI, por sus siglas en inglés). Los resultados mostraron que el efecto positivo y significativo de los influjos de IED sobre el crecimiento económico comienza a manifestarse una vez que el GGI supera este umbral de −1,20. Se proponen y debaten varias políticas. 本稿では、開発途上国102ヵ国における、2000~2018年の海外直接投資(FDI)、経済成長、ガバナンスの質の間の三角関係を検討する。これまでの研究と比べて本研究が目新しいのは、パネル閾値回帰(PTR)モデルを用いてガバナンスの質の最適レベルを決定するという点であるが、これが達成されればFDIの流入によって経済成長が促進される。これら3つの変数の関係は非線形であることがわかった。さらに、海外直接投資と、グローバル・ガバナンス指標(GGI)の閾値である‐1.20を下回る経済成長との間には、有意な関連性がないことが結果から示されている。結果から、GGIがこの閾値である‐1.20を超えた時点で、FDI流入が経済成長に及ぼすプラスかつ顕著な影響が現れ始めることが示された。いくつかの政策案が提案され、議論されている。

Suggested Citation

  • Yosra Saidi & Anis Ochi, 2023. "Estimating relationships among foreign direct investment, governance quality, and economic growth in developing countries using the threshold auto‐regressive model," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(2), pages 403-424, April.
    • Handle: RePEc:bla:rgscpp:v:15:y:2023:i:2:p:403-424
    DOI: 10.1111/rsp3.12654
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