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Empirical Evidence on the Relationship between Foreign Direct Investment and Economic Growth: A Cross-Country Exploration in Asia

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Authors
Roy, Samrat; Mandal, Kumarjit
Issue Date
2012-10
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.25 No.4, pp. 413-439
Keywords
Foreign Direct InvestmentEconomic growthCointegrationGranger causality
Abstract
The issue of capital flows is considered to be the most accessible route for economic growth whereby investment is regarded as the

engine of growth. The worldwide changes have recognized the importance of Foreign Direct Investment (FDI) as one of the possible options to stimulate growth momentum. Against this backdrop this paper examines the short run and long run dynamics between economic

growth and foreign direct investment for selected Asian economies covering the period from 1975 to 2010. A neo-classical production

function is estimated to capture the short run dynamics followed by cointegration technique to capture the long run effect. This paper provides strong evidence regarding the existence of long run equilibrium

relationship between FDI and growth for majority of the countries followed by varied causality between foreign direct investment and economic growth. The policy recommendations may not be uniform for the entire Asian region due to their diversified industrialization experience.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/79636
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.25 no.1/4 (2012)
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