The foreign direct investment–economic growth nexus

By Sasi Iamsiraroj. 2016

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The nexus between foreign direct investment (FDI) and economic growth has been a long-standing debate from mixed empirical findings. There is also a possibility of a bi-directional relationship between FDI and economic growth. This paper investigates FDI–growth associations using a simultaneous system of equations approach of 124 cross-country data for the period 1971–2010. Results from the estimation indicate that overall effects of FDI are positively associated with growth and vice versa; whereas labor force, trade openness and economic freedom are other key determinants of FDI, which in turn stimulate income growth further.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/8f7410d4ec13b04cc4b5a033ff2dcf9111440a33