The Effect of Economic Freedom Index on Foreign Direct Investments: The Case of MINT Countries

Öz

The aim of this study is to investigate the effect of economic freedom index on foreign direct investment in MINT Countries including Mexico, Indonesia, Nigeria and Turkey. Using a panel data model covering the period 1995-2020 and these 4 countries, we tested how the economic freedom index affects FDI inflows in the region. As a result of Pedroni and Kao cointegration tests, it has been understood that the amount of foreign investment made to countries in the long run is related to the economic freedom index of the countries. Contrary to the findings of the previous literature, according to the DOLS MG estimator; It has been determined that a 1-unit change in the economic freedom index causes a 9.9 percent decrease in foreign direct investments. Country-based results show that a 1-unit increase in the economic freedom index causes a 13.2% decrease in Mexico and a 12% decrease in Indonesia. This result indicates that FDI may not have adequate links with business establishments and institutions in host countries and therefore FDI does not contribute much to property protection, improvement of the legal system and voluntary exchange.

Anahtar Kelimeler

• Economic Freedom
• MGE and DOLS MG estimator
• FDI
• MINT Countries

Ekonomik Özgürlük Endeksinin Doğrudan Yabancı Yatırımlara Etkisi: MINT Ülkeleri Örneği

Öz

Bu çalışmanın amacı Meksika, Endonezya, Nijerya ve Türkiye’nin yer aldığı MINT Ülkelerinde ekonomik özgürlük endeksinin ülkeye yapılan doğrudan yabancı yatırım üzerindeki etkisini araştırmaktır. 1995-2020 dönemini ve bu 4 ülkeyi kapsayan bir panel veri modeli kullanarak, ekonomik özgürlük endeksinin bölgedeki Doğrudan Yabancı Yatırım girişlerini nasıl etkilediğini test edilmiştir. Pedroni ve Kao eşbütünleşme testleri sonucunda uzun vadede ülkelere yapılan yabancı yatırım tutarı ülkelerin ekonomik özgürlük endeksi ile ilişkili olduğu anlaşılmıştır. Önceki literatürün bulgularının aksine DOLS MG tahmincisine göre; ekonomik özgürlük endeksindeki 1 birimlik değişimin doğrudan yabancı yatırımlar üzerinde 9,9’luk bir azalışa neden olduğu tespit edilmiştir. Ülke bazlı sonuçlar ise ekonomik özgürlük endeksindeki bir birimlik artışın Meksika’da 13,2’lik, Endonezya’da ise % 12’lik azalışa neden olduğunu göstermektedir. Bu sonuç DYY'nin ev sahibi ülkelerdeki ticari kuruluşlar ve kurumlarla yeterli bağlantılara sahip olmayabileceğini ve bu nedenle DYY'nin mülkiyetin korunmasına, yasal sistemin iyileştirilmesine ve gönüllü mübadeleye fazla bir şey katmadığını göstermektedir.

Anahtar Kelimeler

• Ekonomik Özgürlük
• MGE ve DOLS MG tahmincisi
• DYY
• MINT Ülkeleri

Kaynakça

1. Amal, M., Tomio, B. T., & Raboch, H. (2010). Determinants of foreign direct investment in Latin America. GCG: Revista de globalización, competitividad y gobernabilidad, 4(3), 116-133.
2. Azman-Saini, WNW, Baharumshah, AZ, & Law, SH (2010). Doğrudan yabancı yatırım, ekonomik özgürlük ve ekonomik büyüme: Uluslararası kanıtlar. Ekonomik Modelleme, 27(5), 1079-1089.
3. Bengoa, M., & Sanchez-Robles, B. (2003). Foreign direct investment, economic freedom and growth: new evidence from Latin America. European journal of political economy, 19(3), 529-545.
4. Buyuran, B., & Şit, A. (2021). Entelektüel Sermayenin Firma Performansına Etkileri: Bıst’te Faaliyet Gösteren Ulaştırma, Depolama ve Haberleşme Sektörü Firmaları Üzerine Etkisi. Ekonomi, İşletme ve Maliye Araştırmaları Dergisi, 3(3), 296-308.
5. Çiftçi, C., & Durusu-Çiftçi, D. (2021). Economic freedom, foreign direct investment, and economic growth: The role of sub- components of freedom. The Journal of International Trade & Economic Development, 1-22.
6. Economou, F. (2019). Economic freedom and asymmetric crisis effects on FDI inflows: The case of four South European economies. Research in International Business and Finance, 49, 114-126.
7. Fraser Institute, (2022). The index measures the degree of economic freedom, Retrieved From: https://www.fraserinstitute.org/economic-freedom/approach
8. Ghazalian, P. L., & Amponsem, F. (2019). The effects of economic freedom on FDI inflows: an empirical analysis. Applied Economics, 51(11), 1111-1132.

9. Heritage (2022). About The Economic Freedom Index. Retrieved From: https://www.heritage.org/index/about
10. Imtiaz, S., & Bashir, M. F. (2017). Economic freedom and foreign direct investment in South Asian countries. Theoretical ; Applied Economics, 24(2).
11. Jorgenson, D.W. (1963). Capital Theory and Investment Behaviour. American Economic Review, 53(2). 247-59.
12. Kapuria-Foreman, V. (2007). Economic freedom and foreign direct investment in developing countries. The Journal of Developing Areas, 143-154.
13. Karagöz, E., & YAŞAR, E. (2020). Ekonomik Özgürlüklerin Doğrudan Yabancı Yatırımlara Etkisi: 125 Ülkeden Elde Edilen Bulgular. Balkan Sosyal Bilimler Dergisi, 9(18), 39-50.
14. Kazemi, M., & Azman-Saini, W. N. W. (2017). Foreign direct investment, economic freedom and democracy. International Journal of Economics & Management, 11(1).
15. Meyer, K. E., & Sinani, E. (2009). When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of international business studies, 40(7), 1075-1094.
16. Nasir, Z. M., & Hassan, A. (2011). Economic freedom, exchange rates stability and FDI in South Asia. The Pakistan Development Review, 423-432.
17. Quazi, R. (2007). Economic freedom and foreign direct investment in East Asia. Journal of the Asia Pacific Economy, 12(3), 329-344.
18. Roberts, B. M., & Almahmood, A. (2009). Source country characteristics and the inflow of foreign direct investment into Saudi Arabia. World Economy, 32(12), 1730-1746.
19. Sambharya, R. B., & Rasheed, A. A. (2015). Does economic freedom in host countries lead to increased foreign direct investment?. Competitiveness Review.
20. Sayari, N., Sari, R., & Hammoudeh, S. (2018). The impact of value added components of GDP and FDI on economic freedom in Europe. Economic Systems, 42(2), 282-294.
21. Sofuoglu, E., Kizilkaya, O., & Uysal, D. (2019). Ekonomik özgürlükler ve doğrudan yabancı yatırımlar arasındaki ilişki: Panel eşbütünleşme analizi. Business and Economics Research Journal, 10(2), 341-356.
22. Tobin, J. (1969). A General Equilibrium Approach to Monetary Theory, Journal of Money, Credit, and Banking, 1(1), 15-29.
23. Zghidi, N., Mohamed Sghaier, I., & Abida, Z. (2016). Does economic freedom enhance the impact of foreign direct investment on economic growth in North African countries? A panel data analysis. African Development Review, 28(1), 64-74.
24. Zhang, J., & He, X. (2014). Economic nationalism and foreign acquisition completion: The case of China. International Business Review, 23(1), 212-227.
25. Zhang, J., He, X., & Van Gorp, D. M. (2017). Economic freedom and cross‐border acquisitions from emerging markets into developed economies. Thunderbird international business review, 59(3), 313-331.