Does Foreign Direct Investment Accelerate Economic Growth?

Foreign Direct Investment, Macroeconomic Instability and Economic Growth in Mena Countries

“…As we have seen, findings of Carkovic and Levine (2002) refute the main conclusions of several previous studies. The authors are sceptical because these previous studies did not fully control for simultaneity bias, country-specific effects, and the use of routine of lagged dependant variable in growth regressions 2 .…”

“…This finding is also true according to Kawai (1994). Carkovic and Levine (2002) suggested that there is no robust link between FDI and growth, allowing this relationship to vary with trade openness. Blomstrom et al (1994) also showed that a positive growth-effect of FDI may be real whether the country in sufficiently rich.…”

“…But this direct effect of FDI becomes positive above a threshold of human capital. In the other hand, Carkovic and Levine (2002) found no evidence that years of schooling is critical for growth-effect of FDI. According to Balasubramanyam et al (1996), trade openness is very important in order to obtain the growth-effect of FDI.…”

“…Blomstrom et al (1994) also showed that a positive growth-effect of FDI may be real whether the country in sufficiently rich. Carkovic and Levine (2002) rejected this finding, taking account of an interaction term from income per capita and FDI. suggested that FDI has a positive growth-effect in countries with sufficiently developed financial markets.…”

“…suggested that FDI has a positive growth-effect in countries with sufficiently developed financial markets. According to Carkovic and Levine (2002), this view is not true since FDI flows do not exert an exogenous impact on growth in financially developed economies.…”