Role of sovereign debt on foreign direct investment and economic growth in selected European countries

In the economics literature, investments are reckoned to be a prevalent and powerful instrument to facilitate the growth process. In Europe, FDI has been a crucial part of policy for enhancing productivity and strengthening the association between Europe and the rest of world economy. Nevertheless,...

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Main Author:	Tan, Ai Lian
Format:	Thesis
Language:	English
Published:	2017
Subjects:	Investments Foreign - Europe Economic development
Online Access:	http://psasir.upm.edu.my/id/eprint/70873/1/FEP%202017%2029%20IR.pdf
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id	my-upm-ir.70873
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spelling	my-upm-ir.708732019-08-29T07:09:19Z Role of sovereign debt on foreign direct investment and economic growth in selected European countries 2017-02 Tan, Ai Lian In the economics literature, investments are reckoned to be a prevalent and powerful instrument to facilitate the growth process. In Europe, FDI has been a crucial part of policy for enhancing productivity and strengthening the association between Europe and the rest of world economy. Nevertheless, the onset of the global financial crisis has triggered an enormous soared of sovereign debt in Europe and threatened the viability of the countries. Against this background, the sharp rise of sovereign debt in European countries has agitated the concern of this study regarding its debt condition on foreign capital and economic growth. First, by applying PMG estimate in 10-selected European countries that covered from 1990-2013, the results reveal a negative sign of sovereign debt on FDI. Hence, this suggests that sovereign debt discourages the inflows of foreign investment in European countries. Second, the results show that FDI becomes insignificant while the interaction term between sovereign debt and FDI is highly significant. Hence, this indicates that the effects of FDI on growth is affected by the sovereign debt condition in European countries. Third, the results of PMG estimate suggest an inverted-U shape of sovereign debt and the threshold value is found to be 76%. Besides, the positive impact of FDI on growth will only kick in when the sovereign debt is below than the threshold value. Based on the findings, several implications of the study can be drawn. Since FDI is important to sustain economic growth, incentives such as a stable macroeconomic condition and company tax policy, better institutional quality and investor protection, transparency, lower bureaucracy and corruption, and necessary reforms of the labor market are important to attract foreign investment to sustain economic growth. Besides, since sovereign debt condition adversely affects FDI flows and FDI-growth nexus, then it is important for the country to provide a stable macroeconomic condition through proper debt management to attract FDI and enhance the ability of the host country to benefit from foreign investment. Investments, Foreign - Europe Economic development 2017-02 Thesis http://psasir.upm.edu.my/id/eprint/70873/ http://psasir.upm.edu.my/id/eprint/70873/1/FEP%202017%2029%20IR.pdf text en public doctoral Universiti Putra Malaysia Investments, Foreign - Europe Economic development
institution	Universiti Putra Malaysia
collection	PSAS Institutional Repository
language	English
topic	Investments Foreign - Europe Economic development
spellingShingle	Investments Foreign - Europe Economic development Tan, Ai Lian Role of sovereign debt on foreign direct investment and economic growth in selected European countries
description	In the economics literature, investments are reckoned to be a prevalent and powerful instrument to facilitate the growth process. In Europe, FDI has been a crucial part of policy for enhancing productivity and strengthening the association between Europe and the rest of world economy. Nevertheless, the onset of the global financial crisis has triggered an enormous soared of sovereign debt in Europe and threatened the viability of the countries. Against this background, the sharp rise of sovereign debt in European countries has agitated the concern of this study regarding its debt condition on foreign capital and economic growth. First, by applying PMG estimate in 10-selected European countries that covered from 1990-2013, the results reveal a negative sign of sovereign debt on FDI. Hence, this suggests that sovereign debt discourages the inflows of foreign investment in European countries. Second, the results show that FDI becomes insignificant while the interaction term between sovereign debt and FDI is highly significant. Hence, this indicates that the effects of FDI on growth is affected by the sovereign debt condition in European countries. Third, the results of PMG estimate suggest an inverted-U shape of sovereign debt and the threshold value is found to be 76%. Besides, the positive impact of FDI on growth will only kick in when the sovereign debt is below than the threshold value. Based on the findings, several implications of the study can be drawn. Since FDI is important to sustain economic growth, incentives such as a stable macroeconomic condition and company tax policy, better institutional quality and investor protection, transparency, lower bureaucracy and corruption, and necessary reforms of the labor market are important to attract foreign investment to sustain economic growth. Besides, since sovereign debt condition adversely affects FDI flows and FDI-growth nexus, then it is important for the country to provide a stable macroeconomic condition through proper debt management to attract FDI and enhance the ability of the host country to benefit from foreign investment.
format	Thesis
qualification_level	Doctorate
author	Tan, Ai Lian
author_facet	Tan, Ai Lian
author_sort	Tan, Ai Lian
title	Role of sovereign debt on foreign direct investment and economic growth in selected European countries
title_short	Role of sovereign debt on foreign direct investment and economic growth in selected European countries
title_full	Role of sovereign debt on foreign direct investment and economic growth in selected European countries
title_fullStr	Role of sovereign debt on foreign direct investment and economic growth in selected European countries
title_full_unstemmed	Role of sovereign debt on foreign direct investment and economic growth in selected European countries
title_sort	role of sovereign debt on foreign direct investment and economic growth in selected european countries
granting_institution	Universiti Putra Malaysia
publishDate	2017
url	http://psasir.upm.edu.my/id/eprint/70873/1/FEP%202017%2029%20IR.pdf
_version_	1747812925628743680

Role of sovereign debt on foreign direct investment and economic growth in selected European countries

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