Liberalization, FDI, and Growth in Developing Countries: A Panel Cointegration Approach

By Parantap Basu, Chandan Chakraborty, Derrick P. Reagle. 2003

345 citations recorded by the source corpus.

Using a panel cointegration framework, the article explores the two-way link between FDI and growth for a panel of 23 developing countries. In addition, it investigates the impact of liberalization on the dynamics of the FDI and GDP relationship. A long-run cointegrating relationship is found between FDI and GDP after allowing for heterogeneous country effects. The cointegrating vectors reveal a bidirectional causality between GDP and FDI for more open economies. For relatively closed economies, long-run causality appears unidirectional and runs from GDP to FDI, implying that growth and FDI are not mutually reinforcing under restrictive trade and investment regimes. (JEL F43) Copyright 2003, Oxford University Press.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/31b8e9f92bd6370bc41e78a1c061aeb0ba42c798

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Citations in the corpus

The Impact of Horizontal and Vertical FDI on Host's Country Economic Growth (2008, neutral): “Although it is not a perfect proxy for absorptive capacity, openness has been used as an interaction variable by authors as well ( Basu et al., 2003; Durham, 2004).”
Energy consumption and GDP in developing countries: A cointegrated panel analysis (2005, methodology): “Basu et al. (2003) focus on the two-way linkage between FDI and growth for a panel of developing countries.”
On the Causal Links between FDI and Growth in Developing Countries (2006, neutral): “ports as a percentage of GDP in 1970), which was emphasized by Balasubramanyam et al. (1996) and Basu et al. (2003) .”
Foreign Direct Investment - Growth Nexus: A Review of the Recent Literature (2008, neutral): “Bacic et al. (2005) 11 transition economies 1994- 2002 Insignificiant and mixed results Karbasi et al. (2005) 42 countries 1971- 2000 Positive effect.”
FOREIGN DIRECT INVESTMENT, EXPORT AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM NEW EU COUNTRIES (2012, background): “Alfaro et al. (2001), Lensink and Morrissey (2001), Campos and Kinoshita (2002), Basu et al. (2003), Hermes and Lensink (2003), Nath (2004), Maki and Somwaru (2004), Li and Liu (2005), Hansen and Rand (2006), Lensink and Morrissey (2006), Ghatak and Halicioglu (2007), Apergis et al. (2008), Batten…”
Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries (2019, background): “The relationship between FDI and economic growth has attracted great attention from scholars around the world (Basu et al. 2003; Vo et al. 2019a).”
How Does Foreign Direct Investment Really Affect Developing Countries' Growth? (2012, neutral): “3 Following previous research (see, e.g. Nair-Reichert and Weinhold, 2001; Basu et al, 2003; Hansen and Rand, 2006; Herzer et al., 2008) we use net FDI flows, defined as net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise…”
Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach (2020, background): “Hence, many countries—especially the least developed countries—are implementing liberal economic policies to encourage more capital inflows from developed countries (Bengoa and Sanchez-Robles 2003).”
In search of FDI-led growth in developing countries (2008, methodology): “The sample is very similar to that of Nair- Reichert and Weinhold (2001), who use data for a sample of 24 developing countries, Basu et al. (2003), who employ data for 23 developing countries, and Hansen and Rand (2006), who use data for 31 developing countries.”
Globalization and Economic Growth: A Political Economy Analysis for OECD Countries (2010, background): “In this way, long-run cointegration implies that there is an error correction mechanism capturing the long-run linkage among variables (Basu et al., 2003; Chang & Lee, 2010), relating to the tendency for economic growth and the levels of the globalization variables to move together.”