Foreign Direct Investment and Investment Policy (3rd Edition)

A special issue of Economies (ISSN 2227-7099). This special issue belongs to the section "Macroeconomics, Monetary Economics, and Financial Markets".

Deadline for manuscript submissions: 31 October 2026 | Viewed by 304

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College of Business and Entrepreneurship, Bethune-Cookman University, Daytona Beach, FL 32114, USA
Interests: international trade; foreign direct investment; economic development; economic growth; tourism; exchange rate volatility
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Special Issue Information

Dear Colleagues,

International financial flows, such as foreign direct investment, play an important role in open economies. As such, they are becoming increasingly important for developing countries given their fragile institutions and financial constraints. However, the situation became even more challenging with the COVID-19 pandemic.

This Special Issue of Economies welcomes submissions on any topic related to foreign direct investment and investment policy. The purpose of this publication is to collect recent high-quality research on the different problems related to foreign direct investment, including research pertaining to, but not limited to, the determinants of foreign direct investment, foreign investment and outsourcing, international investment agreements, investment promotion programs, international finance, and investment policy.

This Special Issue welcomes scholars to submit conceptual papers as well as full-length articles on various topics that pertain to foreign direct investment and investment policy. Both empirical and theoretical papers will be considered.

Prof. Dr. E. M. Ekanayake
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 250 words) can be sent to the Editorial Office for assessment.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a double-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • foreign direct investment
  • foreign portfolio investment
  • international finance
  • international
  • investment policy
  • FDI and international trade
  • FDI spillovers
  • determinants of FDI

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Published Papers (1 paper)

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Research

46 pages, 389 KB  
Article
Foreign Direct Investment and Economic Output: The Conditional Roles of Financial Development and Institutional Quality
by Mohammed Saharti
Economies 2026, 14(6), 199; https://doi.org/10.3390/economies14060199 - 2 Jun 2026
Abstract
Foreign direct investment (FDI) is widely promoted as a driver of economic output through mechanisms such as technology transfer, capital accumulation, and productivity spillovers. However, the empirical literature shows highly inconsistent results known as the “FDI-output puzzle.” We argue that these inconsistencies arise [...] Read more.
Foreign direct investment (FDI) is widely promoted as a driver of economic output through mechanisms such as technology transfer, capital accumulation, and productivity spillovers. However, the empirical literature shows highly inconsistent results known as the “FDI-output puzzle.” We argue that these inconsistencies arise because the output-level effects of FDI are non-linear and depend crucially on the host country’s absorptive capacity. By analyzing a global panel of 172 sovereign nations from 2000 to 2022, we demonstrate that FDI’s output impact depends on a country’s financial development and institutional quality. Our baseline fixed effects models yield a positive and significant within-country FDI-output elasticity of 0.019–0.047. Furthermore, interaction models reveal that deeper financial markets and stronger legal institutions amplify FDI’s effect on real GDP levels. Two-stage least squares estimation confirms these relationships are not due to reverse causality. Following I employ a levels specification—regressing the natural logarithm of real GDP on the natural logarithm of FDI—that directly estimates output-level elasticities, capturing the steady-state relationship between FDI and the level of economic output. This dual-specification design is complemented by dynamic panel GMM estimation, which confirms the positive FDI–output relationship in a dynamic setting. Our findings show that attracting FDI alone is insufficient for expanding output; countries must also develop robust financial infrastructure and effective governance to fully benefit from foreign capital. Full article
(This article belongs to the Special Issue Foreign Direct Investment and Investment Policy (3rd Edition))
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