An analysis of the relationship between foreign direct investment and economic growth

Abstract

Employing a panel data modelling technique, we contribute to two critical research issues: what is the link between Foreign Direct Investment (FDI) and economic growth and does the relationship change under different educational, institutional and economic conditions? Overall, the analysis supports the view that FDI has a stronger positive impact on economic growth in countries with a higher level of education attainment, openness to international trade and stock market development, and a lower rate of population growth and lower level of risk. Thus, countries undertaking reform of cross-border capital restrictions and controls and initiating other policy aimed at encouraging FDI need to ensure that broader social policy objectives-such as education and institutional reform-are also undertaken to leverage the benefits from FDI.

Perspectives on FDI, Debt and Economic Growth in Emerging Markets: Evidence from China

“…These results are supported by the firm-level meta-analyses of Havrá nek and Iršová (2011, 2012) which conclude that FDI has positive spillovers [16]. FDI has positive spillovers when the host country is associated with a higher level of education attainment, openness to international trade and a lower rate of population growth (Batten, 2009) [17], or income, instituional framework and human capital (Meyer and Sinani, 2009) [18].…”

The impact of financial development on energy consumption in emerging economies

“…Foreign direct investment can stimulate economic growth through technology transfer and diffusion, spillover effects, productivity gains, and the introduction of new processes, and managerial skills (Batten and Vo, 2009). Studies by Grossman and Helpman (1991), Barro and Salai-Martin (1995) and Hermes and Lensink (2003) suggest that FDI plays an important role in modernizing the economy and promoting economic growth in developing countries.…”

Causal interactions between CO2 emissions, FDI, and economic growth: Evidence from dynamic simultaneous-equation models

“…Most of the past studies are concerned with the questions of whether a higher level of FDI inflows leads to higher additional economic growth and likewise whether higher economic growth sends positive signals to attract further FDI (e.g., Ekanayake and Vogel, 2003;Hermes and Lensink, 2003;Nguyen and Nguyen, 2007;Tsang and Yip, 2007;Batten and Vo, 2009;Anwar and Nguyen, 2010). Their findings often fall into one of the following categories: i) a causal relationship from FDI to GDP; ii) a causal relationship from GDP to FDI; iii) a feedback relationship between FDI and GDP; and iv) no causal relationship between FDI and GDP (neutrality).…”