Causality relationship between foreign direct investments and economic improvement for developing economies: Russia case study

Cover Page

Cite item

Full Text

Abstract

Foreign direct investment (FDI) can have a significant impact on economic development in developing economies like Russia. FDI can bring in capital, technology, and management expertise that can stimulate economic growth, increase employment, and improve productivity. In the case of Russia, FDI has played a vital role in the country’s economic development. A study conducted by the World Bank in 2019 found that FDI inflows have contributed significantly to Russia’s economic growth and led to increased productivity, employment, and exports. The article analyzes the relationship between foreign direct investment and economic growth in Russia using ARDL cointegration and Toda-Yamamoto causality analysis test. The results reveal that there is no causality relation between GDP growth and foreign direct investment inflow in Russia. Overall, foreign direct investment effectively contributes to economic growth in Russia in the short term and not really in the long run.

About the authors

Kouame A. Brou

Peoples’ Friendship University of Russia (RUDN University)

Email: broureino@gmail.com
ORCID iD: 0000-0003-1996-577X

PhD student of Department Information Technology

6, Miklukho-Maklaya St., Moscow, 117198, Russian Federation

Ivan V. Smirnov

Peoples’ Friendship University of Russia (RUDN University); Federal Research Center “Computer Science and Control” of RAS

Author for correspondence.
Email: ivs@isa.ru
ORCID iD: 0000-0003-4490-2017

Candidate of Physical and Mathematical Sciences, Assistant Professor of Department Information technology of Peoples’ Friendship University of Russia (RUDN University); Head of department of Federal Research Center “Computer Science and Control” Russian Academy of Sciences

6, Miklukho-Maklaya St., Moscow, 117198, Russian Federation; 44-2, Vavilova St., Moscow, 119333, Russian Federation

References

  1. M. Blomstrom, A. Kokko, and M. Zejan, “Multinational corporations and productivity convergence in Mexico,” in Foreign Direct Investment. London: Palgrave Macmillan, 2000, pp. 134-159. doi: 10.1057/9780230598614_9.
  2. M. Blomstrom and E. Wolff, “Multinational corporations and productivity convergence in Mexico,” in Convergence of productivity: cross-national studies and historical evidence. Oxford: Oxford University Press, 1994, pp. 133-138.
  3. R. Ekodo, M. Ndam, and K. Ousmanou, “Investissement direct étranger et croissance économique en zone CEMAC: Le rôle du capital humain,” Repéres et Perspectives Économiques, vol. 4, no. 2, pp. 1-22, 2020. doi: 10.34874/IMIST.PRSM/RPE/21529.
  4. B. Bellon and R. Gouia, Investissements directs étrangers et développement industriel méditerranéen, French. Paris: Economica, 1998.
  5. S. Globerman and D. Shapiro, “Global foreign direct investment flows: the role of governance infrastructure,” World Development, vol. 30, no. 11, pp. 1899-1919, 2002. doi: 10.1016/S0305-750X(02)00110-9.
  6. E. Borensztein, J. D. Gregorio, and J.-W. Lee, “How does foreign direct investment affect economic growth,” Journal of International Economics, vol. 45, pp. 115-135, 1998. doi: 10.1016/S0022-1996(97)00033-0.
  7. D. Rodrik, “Institutions for high-quality growth: what they are and how to acquire them,” in International Monetary Fund’s Conference on Second-Generation Reforms, Washington, DC, November 8-9, 1999, ser. NBER working paper series, 2000, pp. 3-31. doi: 10.3386/w7540.
  8. S. M. Abbes, B. Mostéfa, G. Seghir, and G. Y. Zakary, “Causal interactions between FDI, and economic growth: evidence from dynamic panel co-integration,” Procedia Economics and Finance, vol. 23, pp. 276-290, 2015. doi: 10.1016/S2212-5671(15)00541-9.
  9. Ü. Arslan, Y. S. Çeli̇köz, and A. E. Güzel, “Causality relationship between foreign direct investment and export: the case of ddeveloping economies of Asia,” vol. 8, no. 4, 2018. doi: 10.18488/journal.aefr.2018.84.537.551.
  10. S. Sothan, “Causality between foreign direct investment and economic growth for cambodia,” Cogent Economics & Finance, vol. 5, no. 1, p. 1277860, 2017. doi: 10.1080/23322039.2016.1277860.
  11. M. Dritsaki, C. Dritsaki, and A. Adamopoulos, “A causal relationship between trade, foreign direct investment and economic growth in Greece,” American Journal of Applied Sciences, vol. 1, no. 3, pp. 230-235, 2004. doi: 10.3844/ajassp.2004.230.235.
  12. Z. Adalı and S. Yüksel, “Causality relationship between foreign direct investments and economic improvement for developing economies,” vol. 1, no. 2, pp. 109-118, 2017. doi: 10.24954/MJECON.2017.6.
  13. S. Nupehewa, S. Liyanage, D. Polkotuwa, M. Thiyagarajah, R. Jayathilaka, and A. Lokeshwara, More than just investment: causality analysis between foreign direct investment and economic growth, pp. 210-220, Nov. 2022. doi: 10.1371/journal.pone.0276621.
  14. A. K. Mawugnon and F. Qiang, “The Relationship between foreign direct investment and economic growth in Togo [1991-2009],” in Proceedings of the 8th International Conference on Innovation and Management, 2010, pp. 1269-1273.
  15. N. Mamingi and K. Martin, “Foreign direct investment and growth in developing countries: evidence from the countries of the Organisation of Eastern Caribbean States,” vol. 124, pp. 79-98, 2018. doi: 10.18356/e270b670-en.
  16. M. Pesaran, Y. Shin, and R. J. Smith, “Bound testing approaches to the analysis of level relationship,” Journal of Applied Econometrics, vol. 16, no. 3, 2001. doi: 10.1002/JAE.616.
  17. R. Engle and C. Granger, “Co-integration and error correction: representation, estimation, and testing,” vol. 55, no. 2, pp. 251-276, 1987. doi: 10.2307/1913236.
  18. S. Johansen, “Statistical analysis of cointegration vectors,” pp. 231-254, 1988. doi: 10.1016/0165-1889(88)90041-3.
  19. H. Y. Toda and T. Yamamoto, “Statistical inference in vector autoregressions with possibly integrated processes,” Journal of Econometrics, vol. 66, pp. 225-250, 1995. doi: 10.1016/0304-4076(94)01616-8.

Supplementary files

Supplementary Files
Action
1. JATS XML
Download