Threshold effects of World economic uncertainty on foreign investment in developing countries

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran.

2 Assistant Professor, Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran

3 Associate Professor, Department of Financial Management, Yazd Branch, Islamic Azad University, Yazd, Iran

Abstract

One of the important characteristics of investing in the real world is uncertainty, which is mostly not seen in traditional investment theories. Nevertheless, the future flow of criticism affects the investment and ultimately the economic environment. This article examines the threshold effects of world economic uncertainty on foreign investment in developing countries. The statistical method used is threshold panel model and annual combined data between 1992-2022 for 14 developing countries. Considering the effect of world economic uncertainty on net investment in different situations of net investment, the obtained results showed that the net foreign investment of countries follows a non-linear pattern. Also, the impact of global economic uncertainty on the investment of countries is an impact dependent on the initial state of net investment of each country, and countries that are in a higher initial state of net investment, this higher state will lead to a lower impact of economic uncertainty on the investment of countries in the coming years. Finally, if the developing countries can be present in the world arena with higher foreign investment, the impact of the uncertainty of the global economy in the coming years on the net investment of these countries will be less.

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