Empirical Analysis of Economic Cooperation: An Evidence From MINT Economies

Empirical Analysis of Economic Cooperation: An Evidence From MINT Economies

Kunal Dutta (Lovely Professional University, India)
DOI: 10.4018/978-1-7998-1730-7.ch011

Abstract

One of the crucial parts of globalization is the upsurge in the volume of Foreign Direct Investment (FDI) inflows across economies. Thus, it becomes inevitable for the mutual benefit of the countries among themselves as it promotes economic cooperation between them. Due to the favorable demography and increasing population size, MINT economies (Mexico, Indonesia, Nigeria, and Turkey) gain particular attention to FDI for GDP growth. Hence, this chapter analyzes the paramount determinants of GDP growth of MINT economies in the period of 2000-2019. To fulfill the purpose of the study, a linear regression model and pooled data analysis statistical technique are employed. GDP is taken as a dependent variable, while some key factors like inflation, unemployment, FDI, and trade openness are taken as independent variables.
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Introduction

Immediate after the collapse of the Bretton woods system, a flexible or floating exchange system affects the entire world in both positive and negative aspects and seeks the attention of many researchers to investigate their impact over various economic trading blocs (Asteriou, Masatci, & Pılbeam, 2016). Regional Trade Agreement (RTA) covers more than half of international today, operating alongside global multilateral trade agreements under the World Trade Organization (WTO) in which there was an emergence of reducing the limits of tariffs and non-tariffs barriers among countries to boost the trade regarding tangible and non-tangible goods. The sole objective of creating RTA was to reduce the obstacles in the way of globalization and also to make trading nations benefited out of it. The instances of European Union, NAFTA, ASEAN free trade agreements have shown the positive impact of promoting free trade among them and strengthen the economies in terms of socially, politically and economically (Erokhin, 2017; Prabhakar, 2016). Free trade has not only benefited in terms of boosting trade cooperation rather it also extends welfare in the society by removing the cap of high prices in terms of taxes imposed over products imported or exported (Erokhin, 2016a). On the contrary, considerably ignorance was faced by small or least developed economies of the world reason being finding themselves self-insufficient in terms of resources available for carrying out trade with rich countries (Erokhin, 2016b). Even though the RTA has contributed much to the overall growth among small and less developed countries due to removal or concessions on tariffs, which directly benefited them. Regional Trade Agreement ensures the deeper integration which can act as a model of sustained growth in terms of trade and GDP.

The current study aims at focusing on MINT which is an acronym stands for Mexico, Indonesia, Nigeria, and Turkey came into light during 2001 and was firstly coined by Fidelity Worldwide Investment. MINT economies, located at four different continents, are considering as an emerging powerhouse after the BRICS due to many favorable demographic features as well as political and economic stability. A fast-growing young population, natural resource availability, neighbor of developed countries and so on. These advantages drive them equally competitive to the rest of the economic or trading blocs by overpowering the BRICS in forthcoming.

In these economies Turkey has an advantage of having near boundaries to the edge of European economies which may give a boost in trade among them whereas, Mexico is also considered as strongest economy in Latin America strategically situated between South America and the US with ever-growing exports out of which 75 percent alone is towards the US alone which pushes the GDP of Mexican country. Indonesia and Nigeria are also considered to be ever fast-growing economies because of their natural raw material availability with them. In the case of Indonesia is well in the commodity production industry with ever-increasing demand, on contrary to this in case of Nigeria, is still well known and most notable economy among all African countries regarding geographical advantage over rest (Lenee & Oki, 2017). As per the current scenario, nowadays foreign direct investment (FDI) is more inclined towards developing and fast-moving economies than developed economies. There is a big shift of FDI to developing countries that have been witnessed in the last few years back due to several reasons. Since the MINT has emerged as a popular destination of FDI, investigating the indispensable factors involve in attracting FDI becomes a paramount priority.

The efforts have been made to identify the potential investment done by foreign companies among MINT nations and to predict the growth rate in the coming years, data for FDI inward between 1990 and 2019 is taken. Large population, market size, natural resource availability, trade openness are some prominent key factors used as an independent variable to estimate the value of dependent variables that is FDI inflow and helped in checking the trade pattern along with economic cooperation among MINT nations. For fulfilling the purpose of the study, the linear regression model and pooled data, the statistical technique has been employed and the nature of data is on a secondary basis gathered from the World Bank data set.

Key Terms in this Chapter

Foreign Direct Investment: The investment in the host economy for promoting trade among the nations of the globe.

Pooled Data: A mixture of cross-sectional and time-series data.

BRICS: An acronym termed as Brazil, Russia, India, China, and South Africa. They are having a regional trade agreement with each other.

Globalization: The openness of economies made it possible to improve their terms of trade and become more globalized and make counties together for mutual benefit.

Regional Trade Agreement: An agreement between the regions to promote trade on a comparative advantage basis.

Gross Domestic Product: A total money value of all goods and services produced within an accounting year within domestic territory.

MINT: An acronym termed as Mexico, Indonesia, Nigeria, and Turkey.

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