Abstract
The study was conducted to elaborate on the impact of two main components of natural disasters (Population affected and damages) on FDI, industrial growth, and export performance of the South Asian region alongside the Belt and road initiative over 1990–2016. We have conducted cross-sectional dependence (CDP) and slope homogeneity analysis of the data; after finding that the slopes are heterogeneous and CDP found, we have employed second-generation cointegration, Westerlund, the empirical results supported there is a cointegration relationship between the variables. The empirical results obtained from the Augmented mean group long run estimator concluded that the impact of severe natural disasters on FDI is negative; we have found a partially positive effect on exports and a significantly positive relationship with industrial growth for the study area. The role of income and trade openness acts as substantial and positive determinants towards FDI, exports, and the industrial growth for the South Asian countries. However, interestingly, the empirics found the impression of energy consumption partially influential for all the models. In addition, inflation poses a negative role in the dependent variable for the study area. Finally, the policies are discussed for the negative responses of natural disasters and the positive responses that have been reached in the current study.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
China's investment and cooperation in countries along the "Belt and Road" from January to July 2020.
The description & data source for the variables is available in Table 1.
Table 1 Description and source of data gathering Can be accessed from:
https://economics.stackexchange.com/questions/12942/what-is-the-relationship-between-inflation-and importsexports#: ~ :text = So%20this%20seems%20to%20suggest,(conversely)%20imports%20should%20decrease.
Abbreviations
- ADF:
-
Augmented Dickey–Fuller
- AMGE:
-
Augmented mean group estimator
- AR:
-
Autoregressive
- BCIM:
-
The Bangladesh–China–India–Myanmar forum for regional cooperation
- BRI:
-
Belt and road initiative countries
- CADF:
-
Cross-sectional augmented Dickey–Fuller
- CDP:
-
Cross-sectional dependence
- CIPS:
-
Cross-sectionally augmented IPS
- CPEC:
-
China Pakistan Economic Corridor
- CRED:
-
Centre for research on epidemiology of disasters
- DBRI:
-
Dummy for Belt and road initiative countries
- DD:
-
Damages Dummy
- DND:
-
Dummy for natural disasters
- EM-DAT:
-
The Emergency Events Database
- ENU:
-
Energy use
- FDI:
-
Foreign direct investment
- GDP:
-
Gross domestic product
- IG:
-
Industrial growth
- INF:
-
Inflation
- IPS:
-
Im, Pesaran & Shin
- LENU:
-
Log of energy use
- LINF:
-
Log of Inflation
- LPC:
-
Log of per capita
- LTO:
-
Log of trade openness
- MNEs:
-
Multinational enterprises
- PC:
-
Per capita
- PD:
-
Population dummy
- RMSE:
-
Root-mean-square error
- SAARC:
-
South Asia association for regional cooperation
- SH:
-
Slope Homogeneity
- TO:
-
Trade openness
- UNESCAP:
-
The United Nations Economic and Social Commission for Asia and the Pacific
- XP:
-
Exports
References
Adamu FM, Doğan E (2017) Trade openness and industrial growth: evidence from Nigeria. Panoeconomicus 64(3):297–314. https://doi.org/10.2298/PAN150130029A
Akkemik KA (2008) Industrial development in East Asia—a comparative look at Japan, Korea, Taiwan, and Singapore, 1st ed, vol 3. World Scientific Publishing Co. Pte. Ltd. https://doi.org/10.1142/9789812832801
Ali A, and Alpaslan B (2018) Pro-industry policies, sustainability, and industrial growth. In: Yülek MA (ed) Industrial policy and sustainable growth, 1st ed. Springer, pp 27–49. https://doi.org/10.1007/978-981-10-5741-0_8
Ali S, Alam KJ, Islam MS (2016) Effects of trade openness and industrial value added on economic growth in Bangladesh. Int J Sustain Develop Res 2(2):6 https://doi.org/10.11648/j.ijsdr.20160203.11
Anuchitworawong C, Thampanishvong K (2015) Determinants of foreign direct investment in Thailand: does natural disaster matter? Int J Disas Risk Reduct 14:312–321. https://doi.org/10.1016/j.ijdrr.2014.09.001
Bai J, Ng S (2004) A Panic Attack on Unit Roots and Cointegration. Econometrica 72:1127–1177. https://doi.org/10.2307/3598781
Bashir A, Suhel S, Azwardi A, Atiyatna DP, Hamidi I, Adnan N (2019) The causality between agriculture, industry, and economic growth: evidence from Indonesia. ETIKONOMI, 18(2), 155–168. https://doi.org/https://doi.org/10.15408/etk.v18i2.9428
Benali N, Feki R (2018) Natural disasters, information/communication technologies, foreign direct investment and economic growth in developed countries. Environ Econ 9(2):80–87 https://doi.org/10.21511/ee.09(2).2018.06
Benson C, Clay E (2003) Economic and financial impacts of natural disasters: an assessment of their effects and options for mitigation (Economics of Natural Disasters: A Preliminary Investigation, p. 129) [Final Report]. Overseas Development Institute. https://www.researchgate.net/publication/228395565
Botzen WJW, Deschenes O, Sanders M (2019) The economic impacts of natural disasters: a review of models and empirical studies. Rev Environ Econ Policy 13(2):167–188. https://doi.org/10.1093/reep/rez004
Breitung J (2005) A parametric approach to the estimation of cointegration vectors in panel data. Economet Rev 24(2):151–173. https://doi.org/10.1081/ETC-200067895
Buckley PJ, Clegg LJ, Cross AR, Liu X, Voss H, Zheng P (2007) The determinants of chinese outward foreign direct investment on JSTOR. J Int Bus Stud 38(4):499–518. https://doi.org/10.1057/palgrave.jibs.8400277
Cavallo E, Galiani S, Noy I, Pantano J (2013) Catastrophic natural disasters and economic growth. Rev Econ Stat 95(5):1549–1561. https://doi.org/10.1162/REST_a_00413
Chaudhary MA, Amin B (2012) Impact of trade openness on exports growth, imports growth and trade balance of Pakistan. Forman J Econ Stud 8(2011):63–81
Cole MA, Elliott RJR, Toshihiro O, Strobl E (2015) Natural Disasters. Industrial Clusters and Manufacturing Plant Survival, Discussion Papers
Dagli S, Ferrarini B (2019) The growth impact of disasters in developing Asia. ADB Economics Working Paper Series. Asian Development Bank, p 30. https://doi.org/10.22617/WPS190224-2
Destek MA, Sarkodie SA (2019) Investigation of environmental Kuznets curve for ecological footprint: The role of energy and financial development. Sci Total Environ 650(Pt 2):2483–2489. https://doi.org/10.1016/j.scitotenv.2018.10.017
Dong K, Sun R, Li H, Liao H (2018) Does natural gas consumption mitigate CO2 emissions: testing the environmental Kuznets curve hypothesis for 14 Asia-Pacific countries. Renew Sustain Energy Rev 94:419–429. https://doi.org/10.1016/j.rser.2018.06.026
Eberhardt M, Bond S (2009) Cross-section dependence in nonstationary panel models: a novel estimator (MPRA Paper No. 17692). Centre for the Study of African Economies, Department of Economics, University of Oxford, p 28. https://mpra.ub.unimuenchen.de/17692/
Eberhardt M, Bond S (2013) Accounting for unobserved heterogeneity in panel time series models. University of Oxford, mimeo
El Hadri H, Mirza D, Rabaud I (2019) Natural disasters and countries’ exports: new insights from a new (and an old) database. World Econ 42(9):2668–2683. https://doi.org/10.1111/twec.12833
EM-DAT (2019) The international disaster database, center for research on epidemiology of disasters-CRED. Emergency Events Database (EM-DAT). https://public.emdat.be/
Escaleras M, Register CA (2011) Natural disasters and foreign direct investment. Land Econ 87:346–363. https://doi.org/10.2307/41307218
Felbermayr G, Gröschl J (2014) Naturally negative: the growth effects of natural disasters. J Dev Econ 111:92–106. https://doi.org/10.1016/j.jdeveco.2014.07.004
Fisker PS (2012) Earthquakes and economic growth (Working Paper No. 01/2012). Development Research Working Paper Series, p 192. https://www.econstor.eu/handle/10419/87822
Fomby T, Ikeda Y, Loayza N (2013) The growth aftermath of natural disasters. The World Bank, Policy Research Working Paper Series, 28. https://doi.org/10.1002/jae.1273
Gassebner M, Keck A, Teh R (2010) Shaken, not stirred: the impact of disasters on international trade. Rev Int Econ 18(2):351–368. https://doi.org/10.1111/j.1467-9396.2010.00868.x
Im KS, Pesaran M, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econ 115(1):53–74
Jadhav P (2012) Determinants of foreign direct investment in BRICS economies: analysis of economic, institutional and political factor. ProcediaSocBehavSci 37:5–14. https://doi.org/10.1016/j.sbspro.2012.03.270
Kao C (1999) Spurious regression and residual-based tests for cointegration in panel data. J Econ 90(1):1–44. https://doi.org/10.1016/S0304-4076(98)00023-2
Kato, H., & Okubo, T. (2017). The impact of a natural disaster on foreign direct investment and vertical linkages (No. DP2017-018), Keio-IES Discussion Paper Series, pp 1–39). Institute for Economics Studies, Keio University. https://ideas.repec.org/p/keo/dpaper/2017-018.html
Khan A, Chenggang Y, Hussain J, Bano S (2019) Does energy consumption, financial development, and investment contribute to ecological footprints in BRI regions? Environ SciPollut Res. https://doi.org/10.1007/s11356-019-06772-w
Khan A, Chenggang Y, Khan G, Muhammad F (2020) The dilemma of natural disasters: impact on economy, fiscal position, and foreign direct investment alongside Belt and Road Initiative countries. Sci Total Environ 743:140578. https://doi.org/10.1016/j.scitotenv.2020.140578
Khattak SI, Ahmad M, Khan ZU, Khan A (2020) Exploring the impact of innovation, renewable energy consumption, and income on CO2 emissions: new evidence from the BRICS economies. Environ SciPollut Res. https://doi.org/10.1007/s11356-020-07876-4
Klomp J, Valckx K (2014) Natural disasters and economic growth: a meta-analysis. Glob Environ Chang 26(1):183–195. https://doi.org/10.1016/j.gloenvcha.2014.02.006
Kukułka A (2014) Natural disasters and FDI inflow in the developing countries of South-Eastern Asia. PraceNaukoweUniwersytetuEkonomicznego We Wrocławiu 370:208–216
Lee D, Zhang H, Nguyen C (2018) The economic impact of natural disasters in Pacific Island countries: adaptation and preparedness. IMF Working Papers 18:1. https://doi.org/10.5089/9781484353288.001
Liargovas PG, Skandalis KS (2012) Foreign direct investment and trade openness: the case of developing economies. Soc Indic Res 106(2):323–331. https://doi.org/10.1007/s11205-011-9806-9
Li C, van Bergeijk P (2016) Do natural disasters stimulate international trade? In ISS Working Papers—General Series (No. 622), ISS Working Papers - General Series, pp 1–26. International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague. https://ideas.repec.org/p/ems/euriss/94440.html
Loayza NV, Olaberría E, Rigolini J, Christiaensen L (2012) Natural disasters and growth: going beyond the averages. World Dev 40(7):1317–1336. https://doi.org/10.1016/j.worlddev.2012.03.002
Meng Y, Yang S, Shi P, Jeager CC (2015) The asymmetric impact of natural disasters on China’s bilateral trade. Nat Hazard 15(10):2273–2281. https://doi.org/10.5194/nhess-15-2273-2015
Mohan P (2017) Impact of hurricanes on agriculture: evidence from the Caribbean. Nat Hazards Rev 18(3):04016012. https://doi.org/10.1061/(ASCE)NH.1527-6996.0000235
Mohan PS, Ouattara B, Strobl E (2018) Decomposing the macroeconomic effects of natural disasters: a national income accounting perspective. Ecol Econ 146:1–9. https://doi.org/10.1016/j.ecolecon.2017.09.011
Mucuk M, Erkan C, Uysal D (2010) The impact of energy consumption on exports: the Turkish case. Asian J Business Manag 2(1):17–23
Moon HR, Perron B, Moon H, Perron B (2004) Testing for a unit root in panels with dynamic factors. J Econ 122(1):81–126
Noy I (2009) The macroeconomic consequences of disasters. J Dev Econ 88(2):221–231. https://doi.org/10.1016/j.jdeveco.2008.02.005
Ohashi H (2018) The Belt and road Initiative (BRI) in the context of China’s opening-up policy. J Contempor East Asia Stud 7(2):85–103. https://doi.org/10.1080/24761028.2018.1564615
Oh CH, Reuveny R (2010) Climatic natural disasters, political risk, and international trade. Glob Environ Chang 20(2):243–254. https://doi.org/10.1016/j.gloenvcha.2009.11.005
Panwar V, Sen S (2019) Economic impact of natural disasters: an empirical re-examination. Margin J Appl Econ Res 13(1):109–139. https://doi.org/10.1177/0973801018800087
Pedroni P (1999) Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bull Econ Stat 61(s1):653–670. https://doi.org/10.1111/1468-0084.0610s1653
Pedroni P (2001) Purchasing power parity tests in cointegrated panels. Rev Econ Stat 83(4):727–731
Pesaran MH (2004) General diagnostic tests for cross section dependence in panels. In: Cambridge working papers in economics (No. 0435), pp 1–42. Faculty of Economics, University of Cambridge. https://ideas.repec.org/p/cam/camdae/0435.htmlhttps://ideas.repec.org/p/cam/camdae/0435.html
Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J ApplEconomet 22(2):265–312. https://doi.org/10.1002/jae.951
Pesaran MH, Yamagata T (2008) Testing slope homogeneity in large panels. J Econ 142(1):50–93. https://doi.org/10.1016/J.JECONOM.2007.05.010
Qureshi MI, Yusoff RM, Hishan SS, Alam AF, Zaman K, Rasli AM (2019) Natural disasters and Malaysian economic growth: Policy reforms for disasters management. Environ SciPollut Res Int 26(15):15496–15509. https://doi.org/10.1007/s11356-019-04866-z
Raddatz C (2009) The wrath of god: macroeconomic costs of natural disasters. World Bank. https://doi.org/10.1596/1813-9450-5039
Rajapaksa D, Islam M, Managi S (2017) Natural capital depletion: the impact of natural disasters on inclusive growth. Econ Disast Climate Change 1(3):233–244. https://doi.org/10.1007/s41885-017-0009-y
Saidi NB, K. (2017) A robust analysis of the relationship between natural disasters, electricity and economic growth in 41 Countries. J Econ Develop 42(3):89–109
Shabnam N (2014) Natural disasters and economic growth: a review. Int J Disast Risk Sci 5(2):157–163. https://doi.org/10.1007/s13753-014-0022-5
Shughrue C, Werner B, Seto KC (2020) Global spread of local cyclone damages through urban trade networks. Nat Sustain 3(8):606–613. https://doi.org/10.1038/s41893-020-0523-8
Skidmore M, Toya H (2002) Do natural disasters promote long-run growth? Econ Inq 40(4):664–687. https://doi.org/10.1093/ei/40.4.664
Songwathana K (2018) The relationship between natural disaster and economic development: a panel data analysis. ProcEng 212:1068–1074. https://doi.org/10.1016/j.proeng.2018.01.138
Strobl E (2012) The economic growth impact of natural disasters in developing countries: evidence from hurricane strikes in the Central American and Caribbean regions. J Dev Econ 97(1):130–141. https://doi.org/10.1016/j.jdeveco.2010.12.002
Strulik H, Trimborn T (2019) Natural disasters and macroeconomic performance. Environ Resource Econ 72(4):1069–1098. https://doi.org/10.1007/s10640-018-0239-7
Toner-Rodgers A, Friedt F (2020) Natural disasters. Evidence from India. SSRN Electronic Journal, FDI and Intra-National Spillovers. https://doi.org/10.2139/ssrn.3649134
UNCTAD (ed) (2008) Transnational corporations, and the infrastructure challenge. United Nations. https://unctad.org/system/files/official-document/wir2008_en.pdf
Volpe Martincus C, Blyde J (2013) Shaky roads and trembling exports: assessing the trade effects of domestic infrastructure using a natural experiment. J Int Econ 90(1):148–161. https://doi.org/10.1016/j.jinteco.2012.11.001
Westerlund J (2005) New simple tests for panel cointegration. Economet Rev 24(3):297–316. https://doi.org/10.1080/07474930500243019
World Bank (2019) World Development Indicators (WDI) | Data Catalog. World Development Indicators. https://data.worldbank.org/country
Zhang D, Managi S (2020) Financial development, natural disasters, and economics of the Pacific small island states. Econ Anal Policy 66:168–181. https://doi.org/10.1016/j.eap.2020.04.003
Zhao R, Zhong S, He A (2018) Disaster impact, national aid, and economic growth: evidence from the 2008 Wenchuan earthquake. Sustain Switzerland 10(12):4409. https://doi.org/10.3390/su10124409
Acknowledgements
We would like to share our utmost gratitude towards professor’s Li and Professor Dong from School of business Henan University Kaifeng China for their encouragements and assistance during this research project; similarly we would like to thank respected editor in chief Dr. Goff and anonymous reviewers for the valuable comments.
Funding
This project was supported by China Postdoctoral Science foundation and School of Business Henan University Kaifeng China.
Author information
Authors and Affiliations
Contributions
We all authors collectively contributed this study. Lochan Kumar Batala contributed to conceptualization. Lochan Kumar Batala and Anwar Khan were involved in research design and methodology. Lochan Kumar Batala and Anwar Khan contributed to data collection, analysis and software. Lochan Kumar Batala, Anwar Khan and Kalpana Regmi contributed to drafting the manuscript. Xiaoli Wang and Wangxing Yu contributed to validation. Wangxing Yu was involved in supervision. Wangxing Yu, Lochan Kumar Batala, Anwar Khan and Kalpana Regmi contributed to final version of the manuscript.
Corresponding author
Ethics declarations
Competing interest
We (authors) declared that we have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Consent to Publish
We all author(s) agreed to submit our manuscript for the publishing purpose.
Ethical Approval
We declared that we have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Batala, L.K., Yu, W., Khan, A. et al. Natural disasters' influence on industrial growth, foreign direct investment, and export performance in the South Asian region of Belt and road initiative. Nat Hazards 108, 1853–1876 (2021). https://doi.org/10.1007/s11069-021-04759-w
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11069-021-04759-w