The value of natural resource exploitation increased because of economic advancement, which drives industrialization. When natural resources are overexploited through farming, mining, or ...deforestation, it can negatively impact the environment and have financial repercussions for the nation in the long run. Therefore, this study examined the impact of technological innovation, industrialization, foreign direct investment (FDI), and financial development on natural resource extraction. This study utilized the augmented mean group (AMG), common correlated effect mean group (CCEMG), and Dumitrescu and Hurlin causality methods to analyze a panel of OECD countries from 1990 to 2021. The paper discovered that innovation significantly decreases natural resource extraction while financial development expands it. However, when controlling for interactive relationships among the variables, this study discovered that innovation independently increases resource extraction. The study also discovered through our causality tests that resource extraction has bidirectional relationships with all its determinants, except for FDI, where it exhibits a unidirectional relationship. Our findings have significant implications for the environment. Extractive activities, though necessary for industrialization, hamper the environment. Yet, the expectation that innovation and foreign capital might introduce efficiency in resource extraction or even reduce reliance on resource wealth in financially developed economies garners no clear empirical support.
•Examine the effect of industrialization, technological innovation, and foreign capital on natural resource rents for OECD economies.•Augmented mean group (AMG), common correlated effect mean group (CCEMG), and Dumitrescu and Hurlin causality techniques are used in this study.•Financial Development improves the natural resource rents in OECD economies.•Innovation significantly decreases natural resource extraction.•Existence of Bidirectional relationships among the determinants.
The textbook neoclassical growth model predicts that countries with faster productivity growth should invest more and attract more foreign capital. We show that the allocation of capital flows across ...developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more. We call this puzzle the "allocation puzzle". Using a wedge analysis, we find that the pattern of capital flows is driven by national saving: the allocation puzzle is a saving puzzle. Further disaggregation of capital flows reveals that the allocation puzzle is also related to the pattern of accumulation of international reserves. The solution to the "allocation puzzle", thus, lies at the nexus between growth, saving, and international reserve accumulation. We conclude with a discussion of some possible avenues for research.
This paper aims to examine the role of economic diplomacy in attracting foreign capital to emerging countries, by developing a composite index measuring diplomatic activity. We focus on what extent ...does economic diplomacy influence the inflow of foreign capital to emerging countries. Then, we used data from fifty-five (55) developing economies in 2018. The composite index for diplomatic activity is constructed using principal component analysis. Further, we investigated the effect of this index on foreign capital inflows using linear regression based on the ordinary least squares method. The results indicate that the increase in the number of embassies alone does not significantly influence the evolution of diplomatic action. However, diplomacy plays a non-negligible role in attracting foreign capital. Our results demonstrate a positive and significant link between diplomacy and foreign funding, highlighting the importance of this tool for attracting investment and supporting growth in these countries. The findings of this work are going to serve both scientific and practitioners’ communities as it sheds light on the larger debate around the growing role of economic diplomacy in emerging countries in the context of globalization. Moreover, it provides a useful tool for measuring the effectiveness of foreign policies and their impact on economic expansion.
Foreign direct investment (FDI) holds a substantial and rapidly growing presence across every region of the world. However, our understanding of how foreign capital impacts economic growth in ...receiving and investing countries remains in question, despite nearly five decades of research. Our study contributes to this long-standing debate by (1) applying social network analysis to the FDI-growth literature, (2) utilizing recently available bilateral data for a global sample of countries during the post-2000 period, and (3) examining the impact of both inward and outward foreign capital on economic growth. While conventional measures of FDI typically focus on investment volume, we argue that the network structure of investment relations may be equally—or more—important. We construct a global network of FDI during the 2001–2017 period, bringing together two data sets: (1) the United Nations Conference on Trade and Development’s Bilateral FDI Statistics, and (2) the International Monetary Fund’s Coordinated Direct Investment Survey. We then calculate network centrality scores that reflect each country’s level of inward and outward embeddedness in the global FDI network. Drawing from a sample of 1,467 observations across 137 countries during the 2001–2017 period, we estimate two-way fixed effects models to examine the effect of FDI centrality on economic growth. Net of other predictors, we find that inward and outward centrality are positively—and independently—associated with growth, while more conventional measures of foreign capital display weaker and inconsistent effects.
Purpose: The purpose of the study was to examine the key determinants of foreign direct investment (FDI) and foreign portfolio investment (FPI) in emerging market economies, with greater emphasis ...placed on the impact of institutional quality.
Design/Methodology/Approach: The study applied a panel data system generalised method of moments (GMM) model using annual data spanning the period 2007 to 2017, in respect of 12 emerging market economies. To measure institutional quality, the study adopted the Worldwide Governance Indicators, and constructed a composite index for institutional quality using the Principal Components Analysis (PCA) method.
Findings: The results revealed that FDI in the selected emerging markets was attracted by institutional quality and economic growth. Capital account openness, institutional quality and economic growth were positive determinants of FPI. However, stock market development stood out as the key determinant factor for foreign capital inflows.
Implications/Originality/Value: The implications of these findings are that, in their pursuit of foreign capital inflows, these emerging markets should continue to liberalise their economies and develop their financial markets. Importantly, such developments must be coupled with the strengthening of the formal governance institutions. Robust institutions would not only curb institutional weaknesses that deter international capital inflows, but would also insulate emerging markets from unfavourable effects of volatile capital flows.
The accelerating pace of global capital market integration has provided new opportunities for firms to raise capital abroad through global debt issues, cross-listings, and initial public offerings in ...foreign stock exchanges. However, existing empirical evidence suggests that foreign firms tend to be at a disadvantage compared with domestic firms, and they often suffer from investors' "home bias". The objective of this paper is to understand why firms are facing problems when accessing capital in foreign markets, and possible mechanisms that can help to mitigate these problems. It expands the liability of foreignness (LOF) research beyond the product market domain to include liabilities faced by firms attempting to secure resources in foreign capital markets. We identify key differences between product and capital markets related to information environment, time structure of transactions, and linkages between buyers and sellers. We analyze institutional distance, information asymmetry, unfamiliarity, and cultural differences as the main sources of capital market LOF (CMLOF). We suggest possible mechanisms that managers can employ to mitigate CMLOF and overcome investors' "home bias": bonding, signaling, organizational isomorphism, and reputational endorsements. We also outline directions for further theoretical and empirical development of the CMLOF research.
To ensure that benefits from capture fisheries accrue to the nationals, fisheries regulations and acts prioritise local access and harvest rights in near and distant waters within a nation’s ...exclusive economic zone (EEZ). The lack of local capital to finance industrial fishing, such as trawling, has compelled developing coastal countries’ fishermen to access foreign investment through contractual agreement such as hire-purchases. In Ghana, this provision in the Fisheries Act (Act 625), has inadvertently, granted foreign owners de facto ‘recurring’ ownership and control rights over the trawl fisheries, with the nationals holding fishing licences retaining only de jure rights. The insecurity of the de facto rights may lead to overfishing and stock depletion. Using data collected with Fisheries Performance Indicators (FPIs) toolkit, the ecological, economic, and community outcomes of the industrial trawl fishery in Ghana are analysed and compared with the continent’s average performances. Except for community (social) outcomes, which were high and marginally exceeded Africa’s average; the overall ecological sustainability and the associated economic outcomes are performing at suboptimal levels.
•Capture fish stocks are important source of animal protein in developing countries.•Most fisheries are overcapitalised and biological overexploited.•Industrial trawlers overharvest stock and employ destructive technologies.•The performance of an industrial trawl fishery has been assessed.•Social outcomes are good but ecological and economic performances are inadequate.
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