Economic Forces that affects interest rates in Bangladesh.
Foreign Direct Investment And Government Stability
1. Foreign Direct Investment and
Government Stability
Colby, Christian, Danielle, Luis, and Stefan
INB 555 Competing in the Global Economy
2. FDI and Government Stability
Agenda
Question Posed
Country Selection – Stability Ratings
Investing Company Selection
Regression analysis breakdown
Results and analysis
Questions
3. FDI and Government Stability
Question Posed :
“ Is there a correlation between the stability
of a government and its involvement in
Foreign Direct Investment?”
4. FDI and Government Stability
Country Selection – Stability Ratings
30 Nations from around the world
5 different governing types
Stability Rating 1 or 0
Majority are stable
4 countries with instability
5. FDI and Government Stability
Country Selection – Stability Ratings
Top Three countries
Different political systems
All three are permanent members of the UN Security Council
One is considered a developing nation
6.
7.
8. FDI and Government Stability
Regression Analysis
Y = 2,053.25 + 39,776.3(SR) + 0.0000184(TT) + 0.028(GDP) +
0.00000723(FDIS)
• Independent Variables • R Square = 81.85%
– Stability Rating (SR), The • Adjusted R Square =
Top 30 Companies in FDI 78.95%
(TT), GDP (GDP), and FDI
stock (FDIS) • F Statistic = 28.19
– Measured the correlation to • SEE = $228,768.85
overall host country FDI
* Used economic general rules of thumb for critical values
9. FDI and Government Stability
Regression Analysis Cont’d
Variable T statistic Coefficient
Stability Rating 0.312519998 39776.29785
Top 30 Total FDI 0.06283412 1.84186E-05
GDP 0.686520295 0.028163213
FDI Stock 4.395857904 7.23608E-07
10. FDI and Government Stability
Results
“ Is there a correlation between the stability of
a government and its involvement in Foreign
Direct Investment?”
11. FDI and Government Stability
Analysis
Not enough turbulence in sample population
Variety of organization host nations
Stronger way to classify whether a nation is stable or not
Expand number of FDI organizations
Christian -Bring out 5 types of government Name and give a quick explanation of the unstable countries Spain, Italy, Mexico, Iran
Christian-Republic, Parliament, Single PartyPower to veto policies that they do not likeChina
Colby-Possible points to bring out:US and Europe hold lions share of companies#1 and # 3 located in the USBrazil (Petrobras) only South American company to make the Top 30Saudi Arabia ( Saudi Aramco)only Mid eastern country to make Top 30Developing nations – Brazil, China, Russia What ever facts that address this slide
Colby-Largest block held by Oil and GasNext is AutomobileChina has only utility listedUS has telecom, Info techKnow the companies from your Sheet
Danielle-The R2 = 81.85% means that 81.85 % of the variation in host country FDI can be explained using just the independent variables. The (adjusted r square) = 78.94% means that 78.94% of the variation in FDI can be explained using just the independent variables when controlling for both sample size (n = 30) and the number of estimated coefficients. The F statistic of 28.19 means that this level of explained variation is statistically significant (f stat of 28.19 > f critical of 5) at the 99% confidence level. This means that the independent variables as a group explain a significant share of the variation in the dependent variable. The standard error of the estimate of $228,768.85 can be used to indicate the range within which the actual dollar value of FDI with the given variables. On average, FDI (Y) equals Y = estimated Y +/- (2 *SEE) with 95% confidence, and roughly Y = estimated Y +/- (3 * SEE) with 99% confidence. Our goal was to explain the variation in FDI among countries and using this information we can feel strong about our model being significant: Y = 2,053.25 + 39,776.3(SR) + 0.0000184(TT) + 0.028(GDP) + 0.00000723(FDIS) since it explains 81.85% of the variation of host country’s overall FDI. Also we can be 99% confident that overall host country FDI will fall between $1,102,842.26 and $ (269,770.86).
Danielle -When examining the independent coefficient individually we find a more detailed and different story. The t statistic compare the sample characteristic to the standard deviation of that characteristic to tell if there is a relation and how strong. All of these are less than the t critical value of 3 for 99% confidence, which imply that these three independent variables have no statistical significance, or influence, with the model. The coefficient is important because it explains the movement in Y (overall FDI from host countries) with one unit increase or decrease in X (the independent variables). As an example, one unit increase in GDP would result in an overall increase in FDI of host countries by 0.028. The FDI stock was the only variable that was proven to be statistically significant implying it has a strong effect of FDI stock on overall host country FDIIn essence, we have discovered that even though are model explains 81.85% of variation in the overall host country FDI, our independent variables could be shuffled and new ones could be tested to improve that number.
Luis -
Stefan-Only 4 countries ranked unstable More countries possible use all of the UN ; not just top 30 Possible Political, economic, war- what constitutes stability / instability?More organizations involved in FDI; maybe use country regardless of RDI or not?