Foreign Direct Investment (FDI) as a growth-enhancing
component has received great attention of developed countries in general
and less developed countries in particular in recent decades. It has
been a matter of great concern for many economists that how FDI affects
economic growth of the host country. In a closed economy, with no access
to foreign saving, investment is financed solely from domestic savings.
However, in open economy investment is financed both through domestic
savings and foreign capital flows, including FDI. The investments in
form of FDI enable investment-receiving (host) countries to achieve
investment levels beyond their capacity to save.
In the global economy, the performance of any country will
greatly depend on the performance of its exports. The trade performance
determines the prospects of change. It helps countries win friends, and
break the traditional mould of isolation and indifference. The
performance of exports of countries depends on various price and
non-price factors. In international trade transactions it is important
to recognise that these transactions require some amount of time that
occurs between the decision to buy and actual delivery of the product
from foreign country. In the Econometric modelling lag occupies a
central role. It is recognised that due to psychological, technical and
institutional reasons, a dependent variable may respond to explanatory
variables with lapse of time, in particular when dealing with
time-series trade models.
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