A Dynamic Model for determining Inward Foreign ... - Business School

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4.3 Unlagged Model The results of OLS regression in levels show that Jordan economic risk has significant impact on inward FDI in Jordan. Also, the stock market sectors price (banks, services, industries and general sectors) have significant influence on inward FDI in Jordan. Moreover, interest rate is significantly determining inward FDI. However, the D.W test indicates a serial correlation problem and white test indicates a heteroskedasticity problem. In order to solve these problems, the unlagged model is specified in log first differences to remove the serial correlation and non-stationary in order to obtain robust results of OLS regression. The Durbin Watson test (2.060448) shows that the model does not have a serial correlation problem, but there is no significant impact of the country risk on inward FDI. The null hypothesis of the diagnostic white test is rejected which indicates that the model suffers from Heteroskedasticity. Therefore, ML-ARCH model is applied to solve the problem of heteroskedasticity. According to GARCH result in table (4) the model is stable. The results in table (4) provide the first evidence that stock market price play an important role in FDI patterns in Jordan. The coefficient of banking, services and industry stock market price sectors are negatively significant. This indicates that a cheap assets channel for foreign investors. However, the coefficient of general stock market price sector is significantly positive which consider as a cheap capital channel. Therefore, this adds a new dimension to the FDI literature The inflation is negatively significant affect inward FDI and this is consistent with Rammal and zurbruegg (2006, 409) show a negative relationship between annual inflation rate and FDI. This means that an increase in the inflation rate lessens FDI in the host country. This is consistent with Hasen and Gianlulgi (2007, 23) findings. They study the determinants of FDI inflows to Arab Maghreb Union (AMU) countries. They highlight that the annual inflation rate has a negative effects and significant which explain why Maghreb countries attract FDI less than other countries at a similar stage of development. Tevino et al (2008, 131) find insignificant direction that a lower level of inflation rate in host Latin American economies leads to greater level of FDI. Asiedu and Lien (2011, 104) indicate that a less inflation attract more foreign investors and promote FDI. . 20
Table 4: Summery Statistics of the Unlagged Model Results Independent Variable Coefficient t-Statistic z-Statistic (Ml-ARCH) Diagnostics Test D(FR) 0.42671 0.085711 3.558430*** Durbin-Watson Stat (2.060448) D(ER) 0.809387 0.401469 1.397760 D(PR) -0.4667 -0.12343 2.233652* F-Statistic (2.647082)*** D(BS) -0.18892** -2.42733** -21.38985*** D(SS) -0.33693*** -2.96961*** -19.91513*** Serial Correlation D(IS) -0.21832** -2.53558** -17.27124*** LM test *R-squared (0.220649) D(GS) 0.620441** 2.600391** 21.49498*** D(INF) -6.487274** -2.438774** 0.630178 D(INT) -13.2095 -1.09285 0.097132 Variance Equation ( ML-ARCH) D(GDP) 0.066 1.102694 2.750441** GARCH(-1) (0.725844)*** ***,** indicate statistical significant at 1%, 10% level respectively 21
Page 1 and 2: A Dynamic Model for determining Inw
Page 3 and 4: 1. Introduction Foreign direct inve
Page 5 and 6: investors look for the markets whic
Page 7 and 8: macro or micro measures taken by th
Page 9 and 10: exchange rate between the Japanese
Page 11 and 12: Research Methodology and Empirical
Page 13 and 14: and error correction model (ECM) ar
Page 15 and 16: 3 Model Specifications 3.3.1 Unlagg
Page 17 and 18: uncorrelated and normally distribut
Page 19 and 20: ( ) ( ) ∑ ( ̂ ) ( ) ( ) ( ̂ ) W
Page 21: 4.2 Unit Root Test The Augmented Di
Page 25 and 26: Table (5) presents results of VAR l
Page 27 and 28: Table (7) presents the Granger caus
Page 29 and 30: Table7: Vector Autoregressive (VAR)
Page 31 and 32: Table 8 (part: b): Estimates of the
Page 33 and 34: services locally, remove any impedi
Page 35 and 36: Guru-Gharana, Kishor K., and Deergh

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