Outflow FDI and Domestic Investment: Aggregated and Disaggregated Analysis

Waqar Ameer, Helian Xu, Kazi Sohag () and Syed Hasanat Shah
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Waqar Ameer: School of Economics, Shandong Technology and Business University, Yantai 264005, China
Helian Xu: School of Economics and Trade, Hunan University, Yuelushan, Changsha 410079, China
Syed Hasanat Shah: School of Economic, Jilin University, Changchun 130012, China

Sustainability, 2021, vol. 13, issue 13, 1-19

Abstract: Recently, the Gulf Cooperation Council (GCC) member countries increased their foreign investment outflows (OFDI), underpinning domestic investment (DCF) and diversifying their economies to reduce the reliance on hydrocarbon economies and augmenting green investments. Thus, our research study examines the effects of OFDI on aggregate capital formation and the decomposing effects of capital formation in to private as well as public investment by applying the common correlation effects (CS-ARDL) panel data methodology in the GCC countries. Our empirical result findings show that OFDI do not significantly spur domestic investment in the GCC countries. However, our disaggregated analysis shows that OFDI significantly contributes to private capital formation only while its contribution to public capital formation remains inconclusive. The extensive public involvement in the economies causes a crowding-out effect, eventually impedes the economic diversification, competitiveness and green activities. Our empirical evidence provides a few policy implications.

Keywords: outbound FDI; inbound FDI; private capital formation; GCC; panel data; CS-ARDL (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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