The Effect of Economic Policy Uncertainty on Foreign Direct Investment in the Era of Global Value Chain: Evidence from the Asian Countries
Sustainability
; 15(7):6131, 2023.
Article
in English
| ProQuest Central | ID: covidwho-2306387
ABSTRACT
The global value chain has promoted foreign direct investments in emerging markets. Not only resources but also public policies can affect the inflows or outflows of foreign direct investments (FDI). This study investigates the effect of economic policy uncertainty on net foreign direct investment inflows in 48 Asian countries. We use the panel dataset from different sources from 1995 to 2020. Our core dependent variable is net foreign direct investment inflows, and the explanatory variable is economic policy uncertainty. The study's control variables include trade, GDP per capita, GDP growth, population, financial development, inflation, and employment. We use the generalized system method of moment (SYS_GMM). Furthermore, the robustness of our empirical results is checked by using the different proxy variables of policy uncertainty. Our results confirm the negative effect of policy uncertainty on foreign direct investment inflows in 48 Asian countries. Our results show that foreign investment inflows are more sensitive than domestic investment. The influence of domestic and global uncertainty on inward FDI is greater than domestic investment. Furthermore, the interaction effect of financial development (FD) shows that FD does not affect mitigation of the negative impact of global economic policy uncertainty on foreign investment inflow. In contrast, FD mitigates the adverse effects of domestic policy uncertainty on foreign and domestic investment. The findings imply that policies need to be attractive, effective, and transparent to woo FDI to the emerging markets.
Environmental Studies; FDI; financial development; global value chain; GMM; policy uncertainty; Asia; Macroeconomics; Inflow; Economic crisis; International financing; Employment; Foreign investment; Value chain; Public policy; Economic development; Developing countries--LDCs; Political risk; International finance; Economic growth; Uncertainty; Dependent variables; Investments; Foreign policy; COVID-19; Emerging markets; Economic policy; Mitigation; Pandemics; Per capita; Regions; Impact analysis; Gross Domestic Product--GDP; Econometrics; Coronaviruses; Business costs; China
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
Language:
English
Journal:
Sustainability
Year:
2023
Document Type:
Article
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