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Foreign Direct Investment and Growth Symbiosis: A Semiparametric System of Simultaneous Equations Analysis

Author

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  • McCloud Nadine

    (Department of Economics, University of the West Indies at Mona, Kingston 7, Jamaica)

  • Delgado Michael S.

    (Department of Agricultural Economics, Purdue University, West Lafayette, IN 47906-2056, USA, Phone: 765-494-4211, Fax: 765-494-9176)

  • Kumbhakar Subal C.

    (Department of Economics, Binghamton University, Binghamton, NY 13902-6000, USA)

Abstract

We characterize the types of interactions between foreign direct investment (FDI) and economic growth, and analyze the effect of institutional quality on such interactions. To do this analysis, we develop a class of instrument-based semiparametric system of simultaneous equations estimators for panel data and prove that our estimators are consistent and asymptotically normal. Our new methodological tool suggests that across developed and developing economies, causal, heterogeneous symbiosis and commensalism are the most dominant types of interactions between FDI and economic growth. Higher institutional quality facilitates, impedes or has no effect on the interactions between FDI and economic growth.

Suggested Citation

  • McCloud Nadine & Delgado Michael S. & Kumbhakar Subal C., 2018. "Foreign Direct Investment and Growth Symbiosis: A Semiparametric System of Simultaneous Equations Analysis," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-31, January.
    • Handle: RePEc:bpj:jecome:v:7:y:2018:i:1:p:31:n:7
    DOI: 10.1515/jem-2016-0008
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    References listed on IDEAS

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    1. Papaioannou, Elias, 2009. "What drives international financial flows? Politics, institutions and other determinants," Journal of Development Economics, Elsevier, vol. 88(2), pages 269-281, March.
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    4. Huynh, Kim P. & Jacho-Chávez, David T., 2009. "Growth and governance: A nonparametric analysis," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 121-143, March.
    5. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
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