Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode
TL;DR: In this paper, a neutral relationship between foreign direct investment (FDI) and domestic investment in China was found, and when considering the entry mode chosen by foreign investors, they found that whilst equity joint venture (EJV) crowds in domestic investment, wholly foreign-funded enterprise (WFFE) crowds it out.
About: This article is published in Economic Modelling.The article was published on 2017-02-01. It has received 45 citations till now. The article focuses on the topics: Foreign direct investment & Foreign portfolio investment.
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TL;DR: Wang et al. as mentioned in this paper conducted an empirical study on the impact of China's outward foreign direct investment (OFDI) on domestic carbon dioxide emissions in 29 provinces in China from 2003 to 2016.
152 citations
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TL;DR: This article explored the determinants of CO2 emissions in China using aggregate data for more than half a century and found that CO2 emission in China is negatively related to research intensity, technology transfer and the absorptive capacity of the economy to assimilate foreign technology.
Abstract: Although the economy of China has grown very strongly over the last few decades, this spectacular performance has come at the expense of rapid environmental deterioration. Amidst animated debate on the issue of global warming, this study attempts to explore the determinants of CO2 emissions in China using aggregate data for more than half a century. Adopting an analytical framework that combines the environmental literature with modern endogenous growth theories, the results indicate that CO2 emissions in China are negatively related to research intensity, technology transfer and the absorptive capacity of the economy to assimilate foreign technology. Our findings also indicate that more energy use, higher income and greater trade openness tend to cause more CO2 emissions.
73 citations
TL;DR: Wang et al. as mentioned in this paper examined the spatial impacts of foreign direct investment (FDI) on SO 2 emissions in the Beijing-Tianjin-Hebei region located in northern China.
71 citations
TL;DR: In this article, the authors investigate the relationship between FDI and local investment, using a sample of 10 CEEC over the period 1990-2010, and find FDI to crowd out domestic investment, while the effect decreases with time.
Abstract: The aim of this paper is to empirically test the hypothesis of FDI led capital accumulation in Central and Eastern European countries. More precisely, we investigate the relationship between FDI and local investment, using a sample of 10 CEEC over the period 1990-2010. We find FDI to crowd out domestic investment, while the effect decreases with time. Our results also indicate that greenfield FDI may develop long run complementarities with domestic investment, while mergers and acquisitions do not prove any significant effect on domestic investment. Finally, financial development seems to foster a certain crowding-in effect in the case of mergers&acquisitions.
35 citations
References
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TL;DR: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples.
Abstract: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples. If each element of a vector of time series x first achieves stationarity after differencing, but a linear combination a'x is already stationary, the time series x are said to be co-integrated with co-integrating vector a. There may be several such co-integrating vectors so that a becomes a matrix. Interpreting a'x,= 0 as a long run equilibrium, co-integration implies that deviations from equilibrium are stationary, with finite variance, even though the series themselves are nonstationary and have infinite variance. The paper presents a representation theorem based on Granger (1983), which connects the moving average, autoregressive, and error correction representations for co-integrated systems. A vector autoregression in differenced variables is incompatible with these representations. Estimation of these models is discussed and a simple but asymptotically efficient two-step estimator is proposed. Testing for co-integration combines the problems of unit root tests and tests with parameters unidentified under the null. Seven statistics are formulated and analyzed. The critical values of these statistics are calculated based on a Monte Carlo simulation. Using these critical values, the power properties of the tests are examined and one test procedure is recommended for application. In a series of examples it is found that consumption and income are co-integrated, wages and prices are not, short and long interest rates are, and nominal GNP is co-integrated with M2, but not M1, M3, or aggregate liquid assets.
27,170 citations
TL;DR: In this paper, a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables is presented. But the authors do not consider models with predetermined variables that have constant correlation with the effects.
16,245 citations
"Does foreign direct investment crow..." refers background in this paper
...Since domestic investment is often regarded as an engine of sustainable economic development, they share the view expressed by Alguacil et al. (2011) and suggest that “policies designed to attract FDI are not sufficient to ensure economic growth” (Morrissey and Udomkerdmongkol, 2012, p. 443)....
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...2 Since Arellano and Bover (1995) show in their Monte Carlo simulations that lagged levels are often poor instrument for first differences, Agosin and Machado's (2005) choice of the difference GMM estimator may not be an appropriate choice....
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TL;DR: In this paper, the authors consider a nonstationary vector autoregressive process which is integrated of order 1, and generated by i.i.d. Gaussian errors, and derive the maximum likelihood estimator of the space of cointegration vectors and the likelihood ratio test of the hypothesis that it has a given number of dimensions.
16,189 citations
TL;DR: In this paper, the authors developed a new approach to the problem of testing the existence of a level relationship between a dependent variable and a set of regressors, when it is not known with certainty whether the underlying regressors are trend- or first-difference stationary.
Abstract: This paper develops a new approach to the problem of testing the existence of a level relationship between a dependent variable and a set of regressors, when it is not known with certainty whether the underlying regressors are trend- or first-difference stationary. The proposed tests are based on standard F- and t-statistics used to test the significance of the lagged levels of the variables in a univariate equilibrium correction mechanism. The asymptotic distributions of these statistics are non-standard under the null hypothesis that there exists no level relationship, irrespective of whether the regressors are I(0) or I(1). Two sets of asymptotic critical values are provided: one when all regressors are purely I(1) and the other if they are all purely I(0). These two sets of critical values provide a band covering all possible classifications of the regressors into purely I(0), purely I(1) or mutually cointegrated. Accordingly, various bounds testing procedures are proposed. It is shown that the proposed tests are consistent, and their asymptotic distribution under the null and suitably defined local alternatives are derived. The empirical relevance of the bounds procedures is demonstrated by a re-examination of the earnings equation included in the UK Treasury macroeconometric model. Copyright © 2001 John Wiley & Sons, Ltd.
13,898 citations
"Does foreign direct investment crow..." refers background in this paper
...According to Pesaran et al. (2001) and Narayan and Smyth (2005), this test delivers much better small sample properties and places less restrictive conditions on the order of integration in the model....
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TL;DR: In this paper, the estimation and testing of long-run relations in economic modeling are addressed, starting with a vector autoregressive (VAR) model, the hypothesis of cointegration is formulated as a hypothesis of reduced rank of the long run impact matrix.
Abstract: The estimation and testing of long-run relations in economic modeling are addressed. Starting with a vector autoregressive (VAR) model, the hypothesis of cointegration is formulated as the hypothesis of reduced rank of the long-run impact matrix. This is given in a simple parametric form that allows the application of the method of maximum likelihood and likelihood ratio tests. In this way, one can derive estimates and test statistics for the hypothesis of a given number of cointegration vectors, as well as estimates and tests for linear hypotheses about the cointegration vectors and their weights. The asymptotic inferences concerning the number of cointegrating vectors involve nonstandard distributions. Inference concerning linear restrictions on the cointegration vectors and their weights can be performed using the usual chi squared methods. In the case of linear restrictions on beta, a Wald test procedure is suggested. The proposed methods are illustrated by money demand data from the Danish and Finnish economies.
12,449 citations