What is the impact of foreign direct investment on the economic growth of Central Asian countries?
Tashkent, Uzbekistan (UzDaily.com) -- Specialists from the Institute for Forecasting and Macroeconomic Research (IPMI) conducted a study aimed at determining the impact of foreign direct investment (FDI) on the economic growth of Central Asian countries.
According to the study, a 1% increase in FDI inflows leads to economic growth in Central Asia by 0.16%.
FDI inflows, in turn, are influenced by factors such as the size of the domestic market, trade openness, the profitability of natural resources, the quality of infrastructure and human capital.
- At the same time, the volume of the domestic market was assessed as the main factor that has a significant positive impact on FDI inflows. In particular, it was found that an increase in market size by 1% leads to an increase in FDI inflows by 1.2%.
- A 1% improvement in the quality of infrastructure and human capital leads to an increase in FDI inflows by 0.15% and 0.51%, respectively.
Trade openness and the profitability of natural resources also have a positive impact on FDI, but on a smaller scale.
The study used panel data from Central Asian countries for 2000-2020 using the Prais-Winsten regression model and the 2SLS method.