Arazmuradov, Annageldy (2011): Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia.
Download (710kB) | Preview
This paper is about relationship between official development assistance, foreign direct investment and domestic investment in landlocked and less studied young economies of Central Asia. It is important for donor countries to understand whether their investments induce foreign direct investment or vise versa. If so, it creates ground for public-private partnership. If not, then it points of reassessing mechanisms of aid architecture. For public multinational enterprises is important to gain public opinion and further explore new markets. For governments it is crucial to devise policies to favor foreign transfers that bring better welfare improvements. Our results from seemingly unrelated regression for total regional sample demonstrate that (1) foreign aid and FDI are related. (2) we found crowding out effect: domestic investments decrease foreign aid inflows inelastically though. However, on country level these results are different. We conclude that there is an indication for public-private investment partnership.
|Item Type:||MPRA Paper|
|Original Title:||Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia|
|Keywords:||Central Asia; transition economies; foreign direct investment; official development assistance|
|Subjects:||F - International Economics > F3 - International Finance > F30 - General
P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General
|Depositing User:||Annageldy Arazmuradov|
|Date Deposited:||24. Feb 2012 06:17|
|Last Modified:||15. Feb 2013 17:12|
Arellano, C., Bulíř, A., Lane, T., and Lipschitz, L., 2009. The dynamic implications of foreign aid and its variability. Journal of Development Economics, 88, 87–102.
Asian Development Bank (ADB)., 2009. Key Indicators for Asia and Pacific 2009 40th edition. August. ADB.
Asiedu, E., Jin, Y., and Nandwa, B., 2009. Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment? Journal of International Economics, 78, 268-275.
Baum, C.F., 2006. An Introduction to Modern Econometrics Using STATA. Stata Corp LT. Bayulgen, O., 2005. Foreign capital in Central Asia and the Caucasus: Curse or blessing? Communist and Post-Communist Studies, 38, 49-69. Beladi, H., and Oladi, R., 2006. Does Foreign Aid Impede Foreign Investment?, in Professor Hamid Beladi, Chapter 4. Professor E. Kwan Choi (ed.) Theory and Practice of Foreign Aid (Frontiers of Economics and Globalization, Volume 1), Emerald Group Publishing Limited, 55-63. Bengoa, M., and Sanches-Robles, B., 2003. Foreign direct investment, economic freedom and growth: new evidence from Latin America. European Journal of Political Economy, 19, 529-545.
Bhavan, T., Xu, C., and Zhong, C., 2011. The Relationship between Foreign Aid and FDI in South Asian Economies. International Journal of Economics and Finance 3(2), May 2011.
Blaise, S. 2005. On the link between Japanese ODA and FDI in China: A microeconomic evaluation using Conditional Logit analysis. Applied Economics, 37, 51-55.
Bobonis, G.J., and Shatz, H.J., 2007. Agglomeration, adjustment, and state policies in the location of foreign direct investment in the United States. The Review of Economics and Statistics, 89(1), 30-34.
Bourguignon, F., and Sundberg, M., 2007. Is Foreign Aid Helping? Aid Effectiveness: Opening the Black Box. American Economic Review, 97(2), 316–21.
Boudier-Bensebaa, F., 2005. FDI-assisted development in the light of the investment development path paradigm: evidence from Central and Eastern European Countries. Working Paper, University of Paris XII – Val de Marne, ERUDITE.
Cameron, A.C., and Trivedi, P., 2009. Microeconometrics using STATA. Stata Corp LP.
Campos, N.F., and Kinoshita, Y., 2003. Why does FDI go where it goes? New evidence from the transition economies. IMF Working Paper No. 03/228.
Carro, M., and Larrú, J.M., 2010. Flowing Together or Flowing Apart: An Analysis of the Relation between FDI and ODA Flows to Argentina and Brazil. MPRA Paper No. 25064, posted 17 September 2010.
Carstensen, K., and Toubal, F., 2004. Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis. Journal of Comparative Economics 32(1), 3-22.
Caselli, F. and Feyrer, J., 2007. The marginal product of capital. Quarterly Journal of Economics, 122(2), 535-568.
Dalgaard, C-J., Hansen, H., and Tarp, F., 2004. On the Empirics of Foreign Aid and Growth. The Economic Journal, 114(496), F191-F21. Davies, K., 2011. Why and how least developed countries can receive more FDI to meet their development goals. Columbia FDI Perspectives No. 40.
De Melo, Denizer, C., Gelb, A., and Tenev, S., 1997. Circumstance and Choice: The Role of Initial Conditions and Policies in Transition Economies. Policy Research Working Paper 1866, World Bank.
Dreher, A., 2006, Does Globalization Affect Growth? Empirical Evidence from a new Index, Applied Economics, 38(10), 1091-1110.
Dikkaya, M., and Keles, I., 2006. A case study of foreign direct investment in Kyrgyzstan, Central Asian Survey, 25(1–2), 149–156.
Dobrinsky, R., 2007. Capital accumulation during the transition from plan to market. Economics of Transition, 15(4), 845-868.
Dowling, M. and Wignaraja, J., 2006. Central Asia after fifteen years of transition: growth, regional cooperation and regional choices. Asia pacific Development Journal 13(2), December.
Easterly, W., 2007. Was Development Assistance a Mistake? American Economic Review, 97(2), 328–32.
Edmiston, K., Mudd, S., and Valev, N., 2003. Tax structure and FDI. The Deterrent Effects of Complexity and Uncertainty. William Davidson Working Paper Number 558, April.
Financial Times, 2010, “Investing in Central Asia.” http://www.ft.com/reports/investing-in-central-asia-2008 (Accessed 19 April 2010).
Garibaldi, P., Mora, N., Sahay, R. and Zettelmeyer, J., 2001. What moves capital to Transition economies? IMF Working paper, WR/02/64.
Gleason, G., 2001. Foreign policy and domestic reform in Central Asia. Central Asian Survey, 20(2), 167–182.
Globerman, S., and Shapiro, D., 2002. Global Foreign Direct Investment Flows: The Role of Governance Infrastructure. World Development, 30(11), 1899–1919.
Gylfason, T., 2000. Resources, Agriculture and Economic Growth in Economies in Transition. Working Paper.
Hanousek, J., Kočenda, E. and Maurel, M., 2011. Direct and indirect effects of FDI in emerging European markets: A survey and meta-analysis. Economic Systems, 35(3), 301-322.
Hansen, H and Tarp, F., 2000. Aid effectiveness disputed. Journal of International Development, 12, 375-398.
Harms, P. and Lutz, M., 2006. Aid, governance and private investment: Some puzzling findings for the 1990s’. Economic Journal, 116, 773-790.
Hien, P.T., 2008. The effects of ODA in infrastructure on FDI inflows in provinces of Vietnam, 2002-2004. VDF Working Paper No. 089.
Hoen, W.H., 2010. Transition strategies in Central Asia: is there such a thing as “shock-versus-gradualism?” Economic and Environmental Studies, 10(2), 229-245.
Jaumotte, F., 2004. Foreign Direct Investment and Regional Trade Agreements: The Market Size Effect Revisited. IMF Working Paper, WP/04/206.
Johnson, A., 2006. FDI inflows to the Transition Economies in Eastern Europe: Magnitude and Determinants. Electronic Working Paper Series, WP59, Cesis.
Kalyuzhnova, Y., 2003. The First Decade of Economic Transition in Central Asia: An Introduction to the Symposium. Comparative Economic Studies, 45, 437–441.
Kalyuzhnova, Y., and Nygaard, C.A., 2008. State governance evolution in resource-rich transition economies: An application to Russia and Kazakhstan. Energy Policy, 36, 1829–1842.
Kalyuzhnova, Y., and Nygaard, C.A., 2011. Special Vehicles of State Intervention in Russia and Kazakhstan. Comparative Economic Studies, 53, 57-77.
Kapfer, S., Nielsen, R. and Nielson, D., 2007. If You Build It, Will They Come? Foreign Aid’s Effects on Foreign Direct Investment. Paper prepared for the 65th MPSA National Conference.
Karakaplan, M.U., Neyapti, B., and Sayek, S., 2005. Aid and foreign investment: international evidence, Departmental Working Paper, Bilkent University.
Kenisarin, M., and Andrews-Speed, M.P., 2008. Foreign direct investment in countries of the former Soviet Union: Relationship to governance, economic freedom and corruption perception. Communist and Post-Communist Studies, 41, 301-316.
Kimura, H and Todo Y., 2010. Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity Equation Approach. World Development. 38(4), 482-497.
Kinoshita, Y., and Campos, N.F., 2004. Estimating the determinants of foreign direct investment flows: How important sampling and omitted variable biases? BOFIT Discussion paper No.10.
Kirkpatrick, C., Parker, D., and Zhang, Y-F., 2006. Foreign direct investment in infrastructure, in developing countries: does regulation make a difference? Transnational Corporations, 15(1), 143-171.
Kolodko, W.G. 1999. Fiscal Policy and Capital Formation in Transition Economies. IMF Working Paper /99.
Kosak, S. and Tobin, J., 2006. Funding self-sustaining development: The role of aid, FDI and government in economic success. International Organization, 60, 205-243.
Krkoska, L., 2001. Foreign direct investment financing of capital formation in central and eastern Europe. Working paper #67. European Bank for Reconstruction and Development.
Krugman R.P., 1979. Increasing returns, monopolistic competition, and international trade. Journal of International Economics, 9, 469-479.
Lahiri, S., and Michaelowa K., 2006. The Political Economy of Aid,” Review of Development Economics, 10(2), 177–344.
Lansbury, M., Pain, N., and Smidkova, K., 1996. Foreign direct investment in Central Europe since 1990: an econometric study. National Institute Economic Review Publisher: National Institute of Economic and Social Research 1996 Source Issue: n156 Mavrotas, G. and Nunnenkamp, P., 2007. Foreign Aid Heterogeneity: Issues and Agenda. Review of World Economics, 143(4), 585–95.
Mileva, E., 2008. The Impact of Capital Flows on Domestic Investment in Transition Economies. Working Paper 871. February 2008, European Central Bank.
Mody, A., Razin, A., and Sadka, E., 2003. The role of information in driving FDI flow: host country transparency and source country specialization. NBER working paper 9662.
Mody, A., 2004. Is FDI Integrating the World Economy? The World Economy, 27(8), 1195-1222.
Navaretti, J.B., and Venables, A.J., 2004. Multinational firms in the world economy. Princeton, Oxford: Princeton University Press.
Penev, S., 2007. Investment climate and Foreign Direct Investment trends in the South Caucasus and Central Asia. Working Paper. Economic Institute Belgrade.
Pomfret, R., 2005. Trade Policies in Central Asia after EU enlargement and before Russian WTO accession: Regionalism and integration into the world economy, Economic Systems, 29, 32-58.
Pomfret, R., 2010. Exploiting Energy and Mineral Resources in Central Asia, Azerbaijan and Mongolia. Research Paper No. 2010-16. University of Adalaide. Australia.
Selaya, P. and Sunasen, E.R., 2008. Does Foreign Aid Increase Foreign Direct Investment? Discussion paper. Department of Economics. University of Copenhagen. Denmark.
Shiells, R.C., 2003. FDI and the Investment Climate in the CIS Countries. IMF Policy Discussion Paper PDP/03/5. Svensson. J., 2000. Foreign aid and rent-seeking. Journal of International Economics 51(2), 437-461.
Tøndel, L., 2001. Foreign direct investment during transition. Determinants and patterns in Central and Eastern Europe and the former Soviet Union. Working Paper #9 Chr. Michelsen Institute Development Studies and Human Rights.
Vahtra, P., 2005. Russian investments in the CIS-scope, motivations and leverage. Electronic Publications of Pan European Institute, 9/2005.
Venables, A.J., 2009. Economic Integration in Remote Resource-Rich Regions. OxCarre Research Paper 22. Oxford Centre for the Analysis of Resource Rich Economies. August 2009.
Younas, J., 2011. Role of foreign direct investment in estimating capital mobility: a reappraisal of Feldstein-Horioka puzzle. Applied Economics Letters, 18(12), 1133-1137.
Zellner, A., 1962. An efficient method of estimating seemingly unrelated regressions and tests of aggregation bias. Journal of the American Statistical Association, 57(298), 348-368.
Available Versions of this Item
- Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia. (deposited 24. Feb 2012 06:17) [Currently Displayed]