Macroeconomic Drivers of Industrial Performance in the Developing Eight (D-8) Countries

This study investigated the macroeconomic determinants of the manufacturing sector in the Developing 8 (D-8) countries—ie, Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Türkiye—using annual data from 2011 to 2022. The effects of foreign direct investment (FDI), urbanization, inflation, unemployment, and defense expenditures were analyzed with two-stage least squares (2SLS) and generalized method of moments (GMM) estimators to address potential endogeneity. The findings revealed that urbanization has a positive and significant effect on manufacturing, highlighting the role of agglomeration economies and structural transformation. Inflation was also found to support industrial production, suggesting demand-driven dynamics. In contrast, unemployment exerts a negative effect on manufacturing output, highlighting the importance of labor market efficiency and effective resource utilization. Defense expenditure contributes positively to the sector, reflecting demand-side and potential technological spillover effects. However, FDI did not exhibit a significant effect, implying that its effectiveness might depend on country- specific institutional and structural conditions. Overall, the results provide important insights for policy makers aiming to promote sustainable industrial growth in D-8 countries.