The relationships between domestic investment, country risk, governance and economic development: A comparison, Kazakhstan versus Poland
DOI:
https://doi.org/10.15549/jeecar.v9i6.1196Keywords:
country risk, domestic investment, economic development, good governance, Kazakhstan, PolandAbstract
Domestic investment is one of the key drivers for economic growth and development. But domestic investment does not happen automatically. It requires a positive governance and economic environment. The primary aim of this paper was to test the impact and relationship between domestic investment and some of the determinants of domestic investment, including country risk, governance indicators, and economic development. Kazakhstan and Poland were selected as the study regions in this comparative analysis. A quantitative econometric modelling methodology was utilised to determine the relationships between the selected variables by estimating an ARDL model. In the analysis, long-run relationships and short-run causality relationships were estimated. The study and literature review results confirm that domestic investment is crucial in achieving accelerated economic growth and development. In policy development, all effects should be made to ensure an enabling environment to attract investment. Domestic investment leads to increased production and more competitive productivity. Good governance, including quality institutions and policy, is also required for increased investment.
References
Akobeng, E. (2017). Gross capital formation, institutions and poverty in Sub-Saharan Africa. Journal of Economic Policy Reform, 20(2), 136-164. DOI: https://doi.org/10.1080/17487870.2015.1128833
Brooks, C. (2014). Introductory econometrics for finance. 3rd ed. London: Cambridge University Press. DOI: https://doi.org/10.1017/CBO9781139540872
Emeka, A., Idenyi, O.S., & Nweze, N.P. (2017). Domestic investment, capital formation and economic growth in Nigeria. International Journal of Research in Social Sciences, 7(2), 41-65.
Gibescu, O. (2010). Does the gross fixed capital formation represent a factor for supporting the economic growth? Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de/50135/1/MPRA_paper_50135.pdf. Date of access: 12 September 2022.
Hanousek, J., Shamshur, A., Svejnar, J., & Tresl, J. (2021). Corruption level and uncertainty, FDI and domestic investment. Journal of International Business Studies, 52(9), 1750-1774. DOI: https://doi.org/10.1057/s41267-021-00447-w
Harris, R. (2011). Models of regional growth: past, present and future. Journal of Economic Surveys, 25(5), 913-951. DOI: https://doi.org/10.1111/j.1467-6419.2010.00630.x
Hasli, A., Ibrahim, N.A., & Ho, C.S. (2019). The Effects of Political Risk, Macroeconomic and Country Specific Factors on FDI in Developing Countries. International Journal of Academic Research in Business and Social Sciences, 9(6), 369-383. DOI: https://doi.org/10.6007/IJARBSS/v9-i6/5957
IGI Global. (2022). What is gross fixed capital formation? https://www.igi-global.com/dictionary/gross-fixed-capital-formation/55665. Date of access: 2 September 2022.
Kanu, S.I., & Nwaimo, C.E. (2015). Capital expenditures and gross fixed capital formation in Nigeria. Research Journal of Finance and Accounting, 6(1), 188-198.
Keller, W., Yeaple, S.R. (2009). Multinational enterprises, international trade, and productivity growth: firm-level evidence from the United States. The Review of Economics and Statistics, 91(4), 821-831. DOI: https://doi.org/10.1162/rest.91.4.821
Kelly, A.M., Nguéda, R.D.N., & Ketu, I. Does corruption hinder investment in Africa? Evidence from panel data analysis. American Research Journal of Humanities & Social Science, 5(6), 58-68.
Kesar, A., Bandi, K., Jena, P.K., & Yadav, M.P. Dynamics of governance, gross capital formation, and growth: Evidence from Brazil, Russia, India, China, and South Africa. Journal of Public Affairs, e2831.
Krüger, N.A., & Meyer, N. (2021). The development of a small and medium-sized business risk management intervention tool. Journal of Risk and Financial Management, 14(7), 1-14. DOI: https://doi.org/10.3390/jrfm14070310
Kobilov, A.E., & Kurbonov, O.A. (2020). Foreign Direct Investment and Domestic Investment On the Economic Growth of the Uzbekistan - A VECM Analysis. International Journal of Academic Research in Business, Arts and Science, 5(2), 75-86.
Lach, ?. (2010). Fixed capital and long-run economic growth: evidence from Poland. Systems Science, 36(4), 33-50.
Lautier, M., & Moreaub, F. (2012). Domestic investment and FDI in developing countries: the missing link. Journal of Economic Development, 37(3), 1-23. DOI: https://doi.org/10.35866/caujed.2012.37.3.001
Menshikov, A.V., Kalabashkina, Y.V., & Zverev, S.A. (2015). Investment as a factor of economic growth. Mediterranean Journal of Social Sciences, 6(3), 259-264. DOI: https://doi.org/10.5901/mjss.2015.v6n3s7p259
Meyer, D.F. (2021). An assessment of the interrelations between country risk, economic growth and good governance: The case of the Visegrad four. Journal of Eastern European and Central Asian Research, 8(4), 610-627. DOI: http://dx.doi.org/10.15549/jeecar.v8i4.810 DOI: https://doi.org/10.15549/jeecar.v8i4.810
Meyer, D.F., & Mothibi, L. (2021). The Effect of Risk Rating Agencies Decisions on Economic Growth and Investment in a Developing Country: The Case of South Africa. Journal of Risk and Financial Management, 14(7), 1-17. DOI: https://doi.org/10.3390/jrfm14070288
Meyer, D.F., & Sanusi, K.A. (2019). A causality analysis of the relationships between gross fixed capital formation, economic growth and employment in South Africa. Studia Universitatis Babes-Bolyai Oeconomica, 64(1), 33-44. DOI: https://doi.org/10.2478/subboec-2019-0003
Muzurura, J. (2016). Determinants of foreign direct investment (FDI) in Zimbabwe: What factors matter? Research in Business and Economics Journal, 11, 1-15.
Narayanan, S., Choong, C.K., & Lau, L.S. (2020). An investigation on the role of good governance as a mediating factor in the FDI-Growth nexus: An ASEAN Perspective. Economics Bulletin, 40(4), 2769-2779.
OECD. (2022). OECD data. https://data.oecd.org/gdp/investment-gfcf.htm. Date of access: 21 September 2022
Pesaran, M.H., Shin, Y. (1996). Cointegration and speed of convergence to equilibrium. Journal of Econometrics, 71(1), 117-143. DOI: https://doi.org/10.1016/0304-4076(94)01697-6
Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. DOI: https://doi.org/10.1002/jae.616
PRS Group. 2022. International Country Risk Guide. Customer Login | The PRS Group. Date of access: 24 September 2022.
Reig, N. (2013). Effects of foreign direct investment on investment in Uruguay in a long run perspective (1960-2011). Department of Economics, Faculty of social sciences, Universidad de la República, 4, 1-20.
Sabry, M.I. (2015). Good governance, institutions and performance of public-private partnerships. International Journal of Public Sector Management, 28(7), 566-582. DOI: https://doi.org/10.1108/IJPSM-01-2015-0005
S?voiu, G., & ?aicu, M. (2014). Foreign direct investment models, based on country risk for some post-socialist central and eastern European economies. Procedia Economics and Finance, 10, 249-260. DOI: https://doi.org/10.1016/S2212-5671(14)00300-1
Shuaib, I.M., & Ndidi, D.E. (2015). Capital formation: impact on the economic development of Nigeria 1960-2013. European Journal of Business, Economics and Accountancy, 3(3), 23-40.
Soegoto, H., Suryatno., W.S., & Meyer, D.F. (2022). The role of domestic investment, foreign investment and the number of Micro Small and Medium-Sized Enterprises to reduce poverty in Indonesia. Journal of Eastern European and Central Asian Research, 9(5), 901-913. https://doi.org/10.15549/jeecar.v9i5.1072 DOI: https://doi.org/10.15549/jeecar.v9i5.1072
South African Reserve Bank. 2022. Unpacking gross fixed capital formation in South Africa. file:///C:/Users/User/Downloads/Box-2-Unpacking-gross-fixed-capital-formation-in-South-Africa%20(1).pdf. Date of access: 3 September 2022.
Talimova, L.A., Sh, K.N., Zambinova, G.K., & Moldakhmetov, R.K. (2019). Analysis of Investment Factors of the Economic Mechanism of Reindustrialization in the Republic of Kazakhstan. (2), 61-66. DOI: https://doi.org/10.34130/2070-4992-2019-2-61-66
The-Global-Economy. (2022). Global economic data. https://www.theglobaleconomy.com/. Date of access: 5 September 2022.
Toda, H.Y., & Yamamoto. 1995. Statistical inference in Vector Autoregressions with possibly integrated processes. Journal of Econometrics, 66, 225-250. DOI: https://doi.org/10.1016/0304-4076(94)01616-8
Trpeski, P., & Cvetanoska, M. (2019). Gross fixed capital formation and productivity in Southeastern Europe. file:///C:/Users/User/Downloads/FEB%20Zagreb%20FINAL%20Book%20ISSN%202019%20(1).pdf. Date of access: 23 September 2022.
Wale, Y. (2015). Determinants of private investment in Ethiopia: time series analysis. http://repository.smuc.edu.et/bitstream/123456789/2494/1/Yechale%20Wale.pdf. Date of access: 18 September 2022.
World Bank. (2022b). World Bank Open Data. https://data.worldbank.org/. Date of access: 11 September 2022.
World Bank. (2022a). Worldwide Governance Indicators. http://info.worldbank.org/. Date of access: 11 September 2022.
Zhunussova, A.Z., & Dulambayeva, R.T. (2019). The state policy of service sector development in the Republic of Kazakhstan. Journal of Eastern European and Central Asian Research (JEECAR), 6(1), 56-66. https://doi.org/10.15549/jeecar.v6i1.255 DOI: https://doi.org/10.15549/jeecar.v6i1.255
Downloads
Published
How to Cite
Issue
Section
License
The JEECAR journal allows the author(s) to hold the copyright and publishing rights of their own manuscript without restrictions.
This journal applies the Creative Attribution Common License to works we publish, and allows reuse and remixing of its content, in accordance with a CC-BY 4.0 license.
Authors are free to: Share — copy and redistribute the material in any medium or format and Adapt — remix, transform, and build upon the material for any purpose, even commercially.
Under the following terms: Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
No additional restrictions — The author may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
The JEECAR Journal is committed to the editorial principles of all aspects of publication ethics and publication malpractice as assigned by the Committee on Public Ethics.
