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The Role of Foreign Direct Investment and Trade in Urbanization in Developing Asia: Structural Changes after the Global Financial Crisis

Author

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  • MADHABENDRA SINHA

    (Department of Economics and Politics, Visva-Bharati University, West Bengal, India)

  • DARIUS TIRTOSUHARTO

    (Economic and Monetary Policy Department, Bank Indonesia, Jakarta, Indonesia)

Abstract

A dynamic between foreign direct investment (FDI) and international trade, and the level of urbanization, has been observed in many developing countries. This study seeks to fill a literature gap on the extent that FDI and international trade impact developing Asian economies through urbanization. The study explores the relationship between FDI, international trade, and urbanization in 31 developing Asian economies from 1991 to 2019, utilizing the dynamic panel model. Empirical results imply the significant effect of FDI inflows and trade openness on urbanization in developing Asia. The impact is clearly observed following the global financial crisis despite increased deglobalization. This finding supports the existence of structural changes and the transformation of economies in the region, which, among other factors, are driven by stronger global supply chains and improved logistics infrastructure in developing Asia.

Suggested Citation

  • Madhabendra Sinha & Darius Tirtosuharto, 2023. "The Role of Foreign Direct Investment and Trade in Urbanization in Developing Asia: Structural Changes after the Global Financial Crisis," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 40(02), pages 343-362, September.
    • Handle: RePEc:wsi:adrxxx:v:40:y:2023:i:02:n:s0116110523500117
    DOI: 10.1142/S0116110523500117
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    Keywords

    Asia; developing economies; dynamic panel model; foreign direct investment; generalized method of moments; structural change; trade; urbanization;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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