Crowding-out and Crowding-in Effects of Government Bonds Market on Private Sector Investment (Japanese Case Study)

This paper reviews the relationship between public sector investment and private sector investment through government expenditures financed by government bonds in the Japanese economy. This study hypothesizes that deficit financing by bond issues does not crowd out private sector investment, and this finance method may crowd in. Thus the government increases bond issues and sells them in the domestic and international financial markets. This method does not affect interest rates because they are insensitive to government expenditures and they depend on interest rates levels in the international financial market more than in the domestic financial market because of globalization and integration among financial markets.

Human Capital Investment and Poverty Reduction over Generations: A Case from the Rural Philippines, 1979-2003

This paper attempts to identify a pathway out of poverty over generations in the rural Philippines, based on long-term panel data spanning for nearly a quarter of a century. Specifically, it sequentially examines the determinants of schooling, subsequent occupational choices, and current non-farm earnings for the same individuals. We found that an initial rise in parental income, brought about by the land reform and the Green Revolution, among other things, improves the schooling of children, which later allows them to obtain remunerative non-farm jobs. These results suggest that the increased agricultural income, improved human capital through schooling and the development of non-farm sectors are the keys to reducing poverty in the long run. It must be also pointed out that the recent development of the rural non-farm sector offers ample employment opportunities for the less educated, which also significantly contributed to the poverty reduction.

Trade, Foreign Investment and Myanmar's Economic Development during the Transition to an Open Economy

Throughout the 1990s and up to 2005, the adoption of an open-door policy substantially increased the volume of Myanmar's external trade. Imports grew more rapidly than exports in the 1990s owing to the release of pent-up consumer demand during the transition to a market economy. Accordingly, trade deficits expanded. Confronted by a shortage of foreign currency, the government after the late 1990s resorted to rigid controls over the private sector's trade activities. Despite this tightening of policy, Myanmar's external sector has improved since 2000 largely because of the emergence of new export commodities, namely garments and natural gas. Foreign direct investments in Myanmar significantly contributed to the exploration and development of new gas fields. As trade volume grew, Myanmar strengthened its trade relations with neighboring countries such as China, Thailand and India. Although the development of external trade and foreign investment inflows exerted a considerable impact on the Myanmar economy, the external sector has not yet begun to function as a vigorous engine for broad-based and sustainable development.

Foreign Direct Investment Relations between Myanmar and ASEAN

Myanmar highly appreciates foreign direct investment (FDI) as a key solution reducing the development gap with leading ASEAN countries. Accordingly, it is welcomed by the government. Myanmar's Foreign Investment Law was enacted in 1988 soon after the adoption of a market-oriented economic system to boost the flow of FDI into the country. Foreign investors positively responded to these measures in the early years and FDI inflow into Myanmar gradually increased during the period from 1989 to 1996. However, after 1997, FDI inflow was dramatically reduced and markedly declined until 2004. In 2005, FDI inflow increased at an unprecedented rate and reached the highest level in the country's history. However, this growth was not sustainable in the subsequent years, as it declined again and turned stagnant at the previous level. In terms of source regions, ASEAN is a major investor in Myanmar, which investment is significantly exceeds the combined investment of other regions of the world. Among top ten countries, Thailand's investment alone is significantly more than combined total investments of the other nine countries. Next to Thailand in terms of investments in Myanmar are Singapore and Malaysia among ASEAN, at second and third places, respectively. The combined total FDI inflows into the power and oil and gas sector represent about 65 percent of the total investment. There are many opportunities for foreign investment in other sectors, which are not, yet exploited. ASEAN countries will certainly be source countries of Myanmar FDI in the future, and Myanmar should expand to other Asian countries like Japan, India, China, Korea, and Hong Kong where its FDI portfolio is concerned. To effectively attract FDI into the country, Myanmar needs to minimize the effect of policy while opening and encouraging other potential sectors of FDI to foreign investors in ASEAN and Asian countries.

Improving the Foreign Direct Investment Capacity of the Mountainous Provinces in Viet Nam

The main purpose of this research is to suggest policies to improve the foreign direct investment attraction capacity in Northern Mountainous Provinces of Vietnam in short and medium-term. Though this region has huge potentials to develop, but poor infrastructure, remote location and bad FDI climate have hindered the FDI inflows. This research focuses on FDI climate factors, pays attention on region’s constraints, and suggests policy for three levels consisting of national, regional and provincial levels.

The causal relationships in mean and variance between stock returns and foreign institutional investment in India

This paper examines the causalities in mean and variance between stock returns and Foreign Institutional Investment (FII) in India. The analysis in this paper applies the Cross Correlation Function approach from Cheung and Ng (1996), and uses daily data for the timeframe of January 1999 to March 2008 divided into two periods before and after May 2003. Empirical results showed that there are uni-directional causalities in mean and variance from stock returns to FII flows irrelevant of the sample periods, while the reverse causalities in mean and variance are only found in the period beginning with 2003. These results point to FII flows having exerted an impact on the movement of Indian stock prices during the more recent period.

An empirical analysis on the efficiency of the microfinance investment market

This paper empirically analyzes the market efficiency of microfinance investment funds. For the empirical analysis, we use an index of the microfinance investment funds and apply two kinds of variance ratio tests to examine whether or not this index follows a random walk. We use the entire sample period from December 2003 to June 2010 as well as two sub-samples which divide the entire period before and after January 2007. The empirical evidence demonstrates that the index does not follow a random walk, suggesting that the market of the microfinance investment funds is not efficient. This result is not affected by changes in either empirical techniques or sample periods.

Investment promotion agencies: do they work?

In this paper, we examine the role of investment promotion agencies (IPAs) in promoting outward FDI from Japan and Korea. Looking at two home countries enables us to control for both country-pair time-invariant characteristics and host country time-varying characteristics. Our empirical results suggest that home-country IPAs tend to be more effective in promoting outward FDI in politically risky host countries. However, this finding depends on whether the home-country firm is listed or unlisted. More specifically, we find that the positive effect of home country IPAs on outward FDI in politically risky countries is limited to unlisted home- country firms, which are widely assumed to be less competitive and productive.

How does country risk matter for foreign direct investment?

In this paper, we aim to identify the political and financial risk components that matter most for the activities of multinational corporations. Our paper is the first paper to comprehensively examine the impact of various components of not only political risk but also financial risk on inward FDI, from both long-run and short-run perspectives. Using a sample of 93 countries (including 60 developing countries) for the period 1985-2007, we find that among the political risk components, government stability, socioeconomic conditions, investment profile, internal conflict, external conflict, corruption, religious tensions, democratic accountability, and ethnic tensions have a close association with FDI flows. In particular, socioeconomic conditions, investment profile, and external conflict appear to be the most influential components of political risk in attracting foreign investment. Among the financial risk components, only exchange rate stability yields statistically significant positive coefficients when estimated only for developing countries. In contrast, current account as a percentage of exports of goods and services, foreign debt as a percentage of GDP, net international liquidity as the number of months of import cover, and current account as a percentage of GDP yield negative coefficients in some specifications. Thus, multinationals do not seem to consider seriously the financial risk of the host country.

Effects of birth order and sibling sex composition on human capital investment in children in India

The paper explores the effects of birth order and sibling sex composition on human capital investment in children in India using the Indian Human Development Survey (IHDS). Endogeneity of fertility is addressed using instruments and controlling for household fixed effects. Family size effect is also distinguished from the sibling sex composition effect. Previous literature has often failed to take endogeneity into account and shows a negative birth order effect for girls in India. Once endogeneity of fertility is addressed, there is no evidence for a negative birth order effect or sibling sex composition effect for girls. Results show that boys are worse off in households that have a higher proportion of boys specifically when they have older brothers.

Export platform foreign direct investment : theory and evidence

This paper proposes a model that accounts for “export platform” FDI – a form of FDI that is common in the data but rarely discussed in the theoretical literature. Unlike the previous literature, this paper’s theory nests all the typical modes of supply, including exports, horizontal and vertical FDI, horizontal and vertical export platform FDI. The theory yields the testable hypothesis that a decrease in either inter-regional or intra-regional trade costs induces firms to choose export platform FDI. The empirical analysis provides descriptive statistics which point to large proportions of third country exports of US FDI, and an econometric analysis, whose results are in line with the model’s predictions. The last section suggests policy implications for nations seeking to attract FDI.

FDI and investment barriers in developing economies

Does investment liberalization in developing economies affect FDI decisions differently across individual firms? To address this question, we simulate the response of individual firms to reductions in investment costs across developing economies. We explore two policy experiments: elimination of setup-procedure requirements for foreign investors and a reduction in corporate tax rates on foreign-owned multinationals. We find that a relaxing of discriminatory foreign investment procedures induces middle productive firms to increase their entry and production in developing economies substantially, but the most productive firms to expand moderately. Multinationals expand their entry and production in developing economies more substantially following a decline in entry barriers than following a decrease in corporate tax rates.

Assessment of FDI impact on Thailand's production sectors : implications for investment promotion activities

This paper examines the overall and sectoral economic impact of foreign direct investment (FDI) on the Thai economy using the economic data from 2005-2013. In assessing the overall economic impact, it is found that FDI has contributed positively to Thailand's economic growth. However, when analyzing the sectoral details, the empirical results indicate that FDI has a varying impact on the productive sectors in Thailand. Out of the 9 sub-sectors covered by this study, 5 sub-sectors (manufacturing, construction, financial, wholesale, retail trade, and agriculture) show strong statistically-significant positive effects of FDI on the relevant sector's value-added output. Based on these findings, it is suggested that policy-makers, including the Board of Investment, should aim to promote FDI with special consideration of the sectoral impact that would enable Thailand's FDI promotion policies to be more productive and beneficial for the Thai economy.