One-way effect or multiple-way causality: foreign direct investment, institutional quality and shadow economy?

International Economics and Economic Policy - Tập 17 - Trang 219-239 - 2019
Cong Minh Huynh1,2, Vu Hong Thai Nguyen3, Hoang Bao Nguyen2, Phuc Canh Nguyen2
1Becamex Business School, Eastern International University, Thu Dau Mot City, Vietnam
2University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam
3RMIT Vietnam, Ho Chi Minh City, Vietnam

Tóm tắt

This paper empirically investigates the three-way linkages amongst foreign direct investment (FDI), shadow economy and institutional quality by applying the panel dynamic simultaneous-equation modelling approach for a sample of 19 developing Asian countries over the period of 2002–2015. The empirical results by two-step System GMM show that institutional quality attracts inward FDI and FDI in its turn improves institutional quality, institutional quality is not only the cause but also the consequence of the shadow economy, and FDI inflows help reduce shadow economies though the channel of institutional improvement and lower shadow economies – which increase institutional quality – encourage FDI inflows. The empirical insights suggest helpful policy implications to deal with these dynamics simultaneously.

Tài liệu tham khảo

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