Adequacy of governance in the link between foreign direct investment and structural transformation

Abstract

AbstractThe inflow of foreign direct investment has increased in developing nations. The study used panel data from sub-Saharan Africa and East Asia and the Pacific countries to observe the adequacy of governance in linking FDI and structural transformation. Pooled Mean Group estimation technique is utilized for analysis purposes using 31-year-old data. The econometric results suggest that FDI inflows boost structural transformation, while debt and inflation dis-improve structural transformation. Across countries, in the short run, FDI with governance had a negative effect for South Korea. Accordingly, the governments of these regions that attempt to succeed in structural transformation should focus on active utilization of FDI and minimize massive inflow of foreign public debts.

Keywords

• Foreign direct investment
• Governance
• pooled mean group and structural transformation