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Title: Corruption, Foreign Direct Investment and Current Account Balance: A Case of Developing Economies
Authors: Muhammad Ali, Mahnaz
Keywords: Arts & Humanities
Issue Date: 2021
Publisher: Islamia University, Bahawalpur.
Abstract: Developing Asia has received record highest level of inward FDI inflows in 2015. FDI may influence the country‟s Current Account Balance (CAB) position, by affecting the trade account of a country. On the other hand, developing nations often experience similar levels of corruption. At one side developing economies are facing the issue of corruption; on the other hand, they are a potential recipient of FDI. So the present study is intended to explore the impact of corruption level in host economy on inward FDI; then the impact of FDI inflows on the current account balance of the country and the impact on components of trade balance (exports/imports). Data from 2000 to 2017 is used for the panel of 31 developing Asian economies. System GMM (Generalized Method of Moment) technique is applied for empirical investigation since the problem of endogeneity and heteroscedasticity is found in the models. Results reveal that corruption has a positive and statistically significant impact on inward FDI; corruption also has a positive impact on FDI inflows to GDP ratio. Furthermore results assert that inward FDI has a positive and statistically significant impact on the current account balance of the host country. Results of the impact of FDI inflows on exports and imports demonstrate that FDI increases the exports and imports of the host economy. Disaggregated analyses are also performed for the different regions of developing Asia by dividing developing Asia into four categories: East Asia, South-East Asia, South Asia and West Asia. However, the results of different regions have some similarities and some differences with the results of the complete panel of developing Asia. Within developing Asia, countries have different social, economic and cultural characteristics that can be the reason for different results of different regions. In view of the findings of the present research, it can be 2 concluded that corruption is not deterrence for inward FDI; rather it can contribute to improve the CAB of the host economy. Based on the results of the present research it is suggested that developing economies should adopt more economic openness; as it can improve their current account balance position by attracting more inward FDI and by increasing the volume of net exports. Key Words: Corruption, FDI, Current Account Balance, Exports, Imports, Developing Asia.
Gov't Doc #: 22846
Appears in Collections:PhD Thesis of All Public / Private Sector Universities / DAIs.

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