IDEAS home Printed from https://ideas.repec.org/a/ris/joefas/0142.html
   My bibliography  Save this article

Foreign direct investment and institutional stability: who drives whom?

Author

Listed:
  • Mahmood, Nihal

    (International Centre for Education in Islamic Finance, Kuala Lumpur, Malaysia)

  • Hassan, Mohammad

    (Taylor’s University, Subang Jaya, Malaysia)

  • Mustapha, Ishaq

    (International Centre for Education in Islamic Finance, Kuala Lumpur, Malaysia)

  • Tasnia, Mashiyat

    (International Islamic University Malaysia, Kuala Lumpur, Malaysia)

Abstract

Purpose – The purpose of this paper is to examine the relationship between foreign direct investment (FDI) flows and institutional stability. The focus country is Canada. It is one of the few countries where the economy remained relatively stable compared to other economies during the Global Financial Crisis. It is crucial for Canada to determine the optimal level of institutional development to attract more FDI and sustain the sound financial stability in future. Design/methodology/approach – This study uses the auto-regressive distributive lag (ARDL) approach to understand the relationship between FDI and institutional stability along with other controlled variables, for instance, gross national product, inflation and exports. Findings – The key finding of this work is that FDI and institutional stability are cointegrated in the long run. The error correction model of ARDL shed light on institutional stability being an exogenous variable, and FDI is an endogenous variable. Institutional stability affects FDI, as it is exogenous. The findings will help policymakers to implement policies to strengthen the institution’s settings, and this, in turn, will attract more investment. Originality/value – Based on previous theoretical and empirical literature, most of the research points to FDI positively affect institutional stability. In some cases, the relationship does not always hold true. This study will fix the gap in the literature by investigating the relationship between FDI and institutional stability of Canada.

Suggested Citation

  • Mahmood, Nihal & Hassan, Mohammad & Mustapha, Ishaq & Tasnia, Mashiyat, 2019. "Foreign direct investment and institutional stability: who drives whom?," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 24(47), pages 145-156.
    • Handle: RePEc:ris:joefas:0142
    as

    Download full text from publisher

    File URL: https://emeraldinsight.com/doi/full/10.1108/JEFAS-05-2018-0048
    File Function: Full text
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Óscar Afonso & Ana Rita Longras, 2022. "Corruption, institutional quality, and offshoring: How do they affect comparative advantage, inter‐country wage inequality, and economic growth?," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 987-1020, November.
    2. Afonso, Oscar & Bandeira, Ana Maria & Lima, Pedro G., 2022. "Growth and welfare effects of corruption penalties," Economic Systems, Elsevier, vol. 46(3).
    3. James Temitope Dada & Ezekiel Olamide Abanikanda, 2022. "The moderating effect of institutions in foreign direct investment led growth hypothesis in Nigeria," Economic Change and Restructuring, Springer, vol. 55(2), pages 903-929, May.
    4. Uddin, Mohammad Jalal, 2023. "Investigating the impulse responses of renewable energy in the context of China: A Bayesian VAR Approach," Renewable Energy, Elsevier, vol. 219(P2).
    5. Omer Ali Ibrahim & Sonal Devesh & Mughees Shaukat, 2022. "Institutional determinants of FDI in Oman: Causality analysis framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4183-4195, October.

    More about this item

    Keywords

    FDI; Foreign direct investment; ARDL; Economic growth; Institutional stability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:joefas:0142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ESAN Ediciones (email available below). General contact details of provider: https://edirc.repec.org/data/esannpe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.