Economics

Political stability and foreign direct investment inflows in 25 Asia-Pacific countries: the moderating role of trade openness

A. N. N. Le, H. Pham, et al.

This intriguing study by Ai Ngoc Nhan Le, Ha Pham, Dung Thi Ngoc Pham, and Khoa Dang Duong explores how trade openness and political stability influence foreign direct investment (FDI) across 25 Asia-Pacific countries. It highlights an unexpected negative relationship with political stability while showing robust support for trade openness in attracting FDI. Discover how these findings bear important policy implications for sustainable investment in the region!

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Abstract

This article examines the impact of trade openness and political stability on foreign direct investment (FDI) in 25 Asia-Pacific countries from 1990 to 2020. Using the dynamic system Generalized Method of Moments (GMM) to address heteroskedasticity and autocorrelation, and the Johnson-Neyman test to analyze moderation, the study finds that trade openness positively affects FDI, while political stability has a negative effect. Trade openness significantly moderates the relationship between political stability and FDI, a finding robust even before the 2008 financial crisis and in non-tax-haven countries. These findings support market-seeking, efficiency-seeking, resource-seeking, and regulatory risk theories and offer policy implications for attracting sustainable FDI in the Asia-Pacific region.

Publisher

Humanities & Social Sciences Communications

Published On

Sep 23, 2023

Authors

Ai Ngoc Nhan Le, Ha Pham, Dung Thi Ngoc Pham, Khoa Dang Duong

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