The Concept Of Economic Growth Economics Essay

The construct of economic growing and its stimulation through attractive force of transnational corporations has ever been an issue, widely discussed by economic experts. And even though MNEs control many operations other than foreign direct investings, the latter has been a focal point of many recent plants ( Blonigen, 2005 ) . In the visible radiation of today ‘s increasing competition for FDI among states, the inquiry about factors that impact FDI has become even more of import. Globalisation leaves states no pick but to open their economic systems to the foreign influence, so it ‘s utile to cognize whether it is good and which factors determine this influence. For states like Ukraine, that are reconstituting their economic system, FDI determiners are particularly critical as attractive force of the foreign capital is one of the most important ways to turn for these states. Much research today is dedicated to Ukraine ‘s passage to the market economic system, but really few reference determiners of foreign direct investing in Ukraine. This paper will try to decide the issue.

The research subject straight corresponds to the faculties, studied by the writer, specifically “ Economicss of Emerging Markets ” , “ International Political Economy ” and “ Business Strategy and Sustainability ” every bit good as to the faculties from the old old ages, such as “ Macroeconomicss ” , “ Econometricss ” and others. Besides that, being a Ukraine occupant, the writer will be dedicated to the subject even more and will hold entree to some extra beginnings of information.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

Over the last decennaries a big figure of states have benefited from pulling transnational corporations. A turning success of China, Singapore, Hong Kong, India, Malaysia, Brazil, Mexico, etc. can turn out that the proper usage of foreign capital is good for economic growing. Therefore, this work will concentrate on the function of such factors, as corruptness, openness, statute law, revenue enhancements, economic freedom etc. , in pulling FDI. Throughout the history, different authoritiess have been taking at assorted economic indexs, but yet merely some of them have succeeded. That is why understanding what factors are relevant and how they impact FDI is critical and can assist state germinate and transform from developing into developed. This paper will seek whether there is a peculiar group of economic indexs, related to the state ‘s attraction for investors. The findings will be used to look for constructive solutions and recommendations for the economic development of Ukraine. Thus, the purpose of this research is to place chief determiners of FDI, measure their impact on the degree of foreign investings in different developing states and use the consequences to the Ukraine ‘s economic system.

Research Aims

Perform a thorough literature reappraisal:

Identify theoretical accounts and constructs used in related researches

Compare different attacks, analyse their benefits and drawbacks

Expression for the extra theoretical accounts that will procure statistical significance

Choose theoretical accounts that will be used to find correlativity between variables

Identify cardinal variables, determiners of FDI:

Critically examine old surveies refering FDI determiners

Define strongly positive, strongly negative and indefinite variables

Concept a arrested development

Perform a cross-section information analysis of the sample of states:

Search the latest information in kineticss

Analyse informations, determine significance of variables, utilizing chosen econometric theoretical accounts

Produce consequences

Analyse the consequences, using them to the Ukraine ‘s economic system:

Supply a brief mentality of the Ukraine ‘s economic environment

Determine the function of antecedently found factors in Ukraine

Decide on which indexs should be improved to increase the state ‘s public presentation

Produce decisions and recommendations, define restrictions

Initial Literature Review

This subdivision of the work will cover different attacks used in similar surveies and effort to specify cardinal theoretical constructs and indexs determined by assorted writers.

The inquiry of FDI determiners has been brought to light many times over the last decennaries, deriving more and more attending. First works to touch this issue day of the month from the first half of twentieth century, when Ohlin ( 1933 ) assumed that companies invest in foreign markets because of profitableness and low involvement rates to finance these FDI. However, the existent roar in this field happened in the terminal of the 2nd half of the century. In the 2nd edition of Multinational Enterprise and Economic Activity, Caves ( 1996 ) even comments that the sum of plants related to this subject and appeared since 1982 is equal to the sum of those, that were published of all time earlier.

Such writers as Dunning ( 1988 ) , Buckley ( 1981 ) , Hymer ( 1976 ) , Caves ( 1982 ) and Aliber ( 1970 ) have made a important part into this country and laid the foundation of farther research. They studied the function of imposts countries, revenue enhancement governments, currency differences, rates of capitalization and market sizes ( Aliber, 1970 ) ; examined variables related to company ‘s ownership and dimension, and variables, derived from market failures ( Hymer, 1976 ) ; looked at the costs of spread outing to a foreign market, demand conditions and market growing rates ( Buckley, 1981 ) ; emphasized dealing costs and exchange rates ( Caves, 1982 ) ; and developed models ( OLI-paradigm ) for proper analysis ( Dunning, 1988 ) . Nevertheless, some writers argue that there are still no “ true ” FDI determiners, likely because different variables and factors can impact state ‘s attraction for investors both positively and negatively ( Kok and Ersoy, 2009 ) . Blonigen ( 2005 ) in his paper provides a reappraisal of empirical literature on FDI determiners. Using different beginnings he describes how revenue enhancements, exchange rates, establishments and trade ordinances affect MNEs determinations to put in a state. Yet, he concludes that this country of research is still in its babyhood and that statistical significance of many plants is dubious because impact of most factors in short tally, examined by most writers, differs significantly if measured in the long tally.

However, more recent plants analyse informations in the long clip periods. For illustration, Vita and Kyaw ( 2008 ) usage indexs for the period 1976-2001, and Kok and Ersoy ( 2009 ) examine informations for the old ages 1976-2005. The 2nd group of writers has besides performed a nice research of literature, comparing how different surveies treated assorted indexs. Harmonizing to this, most writers considered openness, growing rates, economic freedom, human capital and market sizes to hold positive impact on FDI, while such indexs as corruptness, budget shortage, revenue enhancements and exchange rates were by and large referred to as negative 1s.

Analyzing similar surveies, one can place a figure of econometric theoretical accounts, used in empirical probes:

Ordinary least squares ( OLS ) method ( Mohamed and Sidiropoulos, 2010 ; Kok and Ersoy, 2009 )

Vector autoregression ( VAR ) analysis ( Seetanah and Rojid, 2011 ; Vita and Kyaw, 2008 )

Autoregressive integrated traveling norm ( ARIMA ) theoretical account ( Singhania and Gupta, 2011 )

Gary Koop in Introduction to Econometrics ( 2008 ) describes most normally used theoretical accounts. Harmonizing to him, OLS theoretical account shows the effects of alteration in a certain variable on a dependent one, given other independent variables are changeless. This theoretical account is rather popular and dependable, but may bring forth a colored consequence. ARIMA theoretical account is by and large used in clip series probes, but is unpopular and severely optimized. VAR analysis allows several variables to be dependent and is first-class in prediction, but in the same clip it appears to be extremely atheoretical. For panel informations analysis Koop suggests utilizing either pooled-OLS theoretical account or single effects theoretical accounts, which are fixed and random effects theoretical accounts. However, farther statement is that standard arrested development theoretical accounts ( OLS, GLS, etc. ) are frequently non appropriate, particularly when persons have different arrested development lines or time-invariant variables are used. In this instance single effects theoretical accounts are better. A Hausman trial can be performed to happen out which one of these theoretical accounts is suited ( Koop, 2008 ) . Therefore, single effects theoretical account will be used as one of the most appropriate for clip series cross-section informations analysis.

To take a set of variables some plants ( Neuhaus, 2006 ; Galan and Gonzalez-Benito, 2001 ; Coskun, 2001 ) use the alleged OLI-paradigm, developed by Tormenting in 1977. The theoretical account distinguishes three groups of factors: ownership advantages, locational advantages and benefits of internationalization ( Dunning, 1988 ) . In his book Marco Neuhaus ( 2006 ) performs an analysis of FDI in passage economic systems of Central and Eastern Europe. He argues that ownership and internationalization factors are critical merely in finding FDI influx to developed states, whereas in developing 1s locational factors, such as market size, labor costs, revenue enhancement advantages, political stableness, substructure etc. are decisive. Since Ukraine belongs to this group, his analysis is peculiarly utile.

In comparing to the most developed and developing states, Ukraine is well immature state, holding been independent for every bit small as 21 old ages. Ukrayina is the 2nd largest state in the Europe, has a favorable geopolitical location and is rich in resources. As of 2009, literacy rate in Ukraine was 99.7 % ( WorldBank, 2012 ) . Besides, approximately 30 % of population hold high grades ( Tansil and Eff, 2003 ) . Furthermore, as of October 2012 norm monthly wage in Ukraine was merely 3110 UAH ( approx. 381 USD ) compared to about 3000 USD in EU in 2009 ( State Statistics Service of Ukraine, 2012 ; Eurostat, 2012 ) . Given high degree of human capital, low rewards and size of domestic market, the potency of Ukraine in pulling FDI is difficult to overrate ( OECD, 2007 ) . Despite this figures, Ukraine has non been really successful in pulling FDI so far, holding accumulated 4 times less FDI than neighboring Poland ( CIA Factbook, 2012 ) , the state that experienced same challenges after deriving independency merely 2 old ages before Ukraine. Analysing FDI inflows to Ukraine Giucci and Kirchner ( 2011 ) conclude that low public presentation happens because of unequal execution of statute law, political and macroeconomic instability, deficiency of openness and hapless denationalization model. OECD ‘s economic appraisal of Ukraine ( 2007 ) besides adds such factors as barriers to merchandise, unhealthy concern environment, corruptness and deficiency of the regulation of jurisprudence.

Research Methods

In add-on to the general purpose, this paper attempts to look into the undermentioned hypotheses:

Such factors as institutional model and denationalization are critical in pulling FDI

MNE ‘s benefits from spread outing to states with passage economic system are non merely locational

Corruption index has a strongly negative consequence on FDI attractive force in Ukraine

Reaching political stableness will hike Ukraine ‘s FDI

To happen an reply, secondary informations will be collected and analysed. Key variables will be chosen with the aid of relevant literature. Factors that are to be analysed:

Market size


Degree of corruptness

Hazard, associated with the state

Growth rates

Privatization index

Degree of institutionalization


Tax governments

Inflation rates

Telephone lines ‘ coverage

Labor costs

Trade barriers

Human capital

External debt

For statistically important consequence the indexs of 10-20 developing states for the last 15 old ages will be processed utilizing single effects methods. The sample will include assorted states e.g. Brazil, China, Egypt, Georgia, India, Malaysia, Mexico, Poland, Russia, Ukraine, etc. , based on the information handiness. The exact theoretical account will be chosen based on the appropriateness trial.

Information will be taken from different beginnings, specifically:

Edinburgh Napier University Library


ABI/Inform Global

Emerald Diaries

Expanded Academic

ASAP ( Gale )

ScienceDirect ( Elsevier )


International and states ‘ statistics databases

Google bookman

Since this thesis is dedicated to deeper analysis of one peculiar state, a cross-country analysis will be made to guarantee generalisability of the work. To avoid mistakes, econometric theoretical accounts should to be checked for consistence, which will be done utilizing Hausman ‘s trial. However, a prejudice may happen because of the usage of complex statistical theoretical accounts and high correlativity of variables. There is besides a hazard of omitted variables, because such FDI and big figure of economic indexs are mutualist. Another hazard can dwell in the deficiency of information for certain periods of clip for some states or indexs. However, every attempt will be made to guarantee that the research is free from prejudice and that all the beginnings in the work are acknowledged.

Timeline of Dissertation

Literature reappraisal: Weeks 6 to 15 ( S1 )

Prepare thesis proposal: Weeks 6 to 12 ( S1 )

Submit thesis proposal: 30 November 2012

Develop research instruments: Weeks 1 to 2 ( S2 )

Submit bill of exchange literature reappraisal: Week 2 ( S2 )

Gather informations: Weeks 3 to 5 ( S2 )

Compare research theoretical accounts and attacks, prove them for rightness Weeks 5 to 6 ( S2 )

Run the theoretical account and acquire some consequences: Week 6 ( S2 )

Analyse the consequences: Weeks 7 to 8 ( S2 )

Assess Ukrainian economic system, apply consequences to it: Weeks 8 to 9 ( S2 )

Discuss findings: Weeks 9 to 10 ( S2 )

Produce decisions and recommendations: Week 11 ( S2 )

Produce abstract: Week 11 ( S2 )

Concluding redaction: Weeks 10 to 13 ( S2 )

Submit thesis: 18 April 2013

Leave a Reply

Your email address will not be published. Required fields are marked *