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Impact of foreign direct investment volatility on economic growth of asean-5 countries

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Author Info

  • Chee-keong Choong

    () (Department of Economics, Faculty of Business and Finance, Universiti Tunku Abdul Rahman)

  • Venus khim-sen Liew

    () (Department of Economics, Faculty of Economics and Business, Universiti Malaysia Sarawak,)

Abstract

This study examines the impact of volatility of FDI, rather than its level on the economic growth of ASEAN-5 countries. Using bounds testing approach, we show that FDI volatility retards long-run economic growth in Indonesia, Malaysia, the Philippines and Thailand. Our results suggest that the economic growth of Indonesia is the most susceptible to the adverse effect of FDI volatility. These findings, which are robust to different measures of FDI volatility, are of concern in dealing with the economic growth of developing countries in the ASEAN region, which rely heavily on FDI.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P31.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 1829-1841

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Handle: RePEc:ebl:ecbull:eb-09-00137

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Related research

Keywords: Foreign direct investment; economic growth; volatility; cointegration; ASEAN; ARDL;

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References

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  1. Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," The Journal of Development Studies, Taylor and Francis Journals, vol. 36(3), pages 31-49.
  2. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 66-92.
  3. Robert Lensink & Oliver Morrissey, 2006. "Foreign Direct Investment: Flows, Volatility, and the Impact on Growth," Review of International Economics, Wiley Blackwell, vol. 14(3), pages 478-493, 08.
  4. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor and Francis Journals, vol. 37(17), pages 1979-1990.
  5. Lensink, Robert & Morrissey, Oliver, 1999. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," CDS Research Reports 199906, University of Groningen, Centre for Development Studies (CDS).
  6. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," The Journal of Development Studies, Taylor and Francis Journals, vol. 34(1), pages 1-34.
  7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  8. Robert F. Engle & Takatoshi Ito & Wen-Ling Lin, 1991. "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market," NBER Working Papers 2609, National Bureau of Economic Research, Inc.
  9. Lensink, Robert & Morrissey, Oliver, 2002. "The volatility of FDI, not the level, affects growth in developing countries," CDS Research Reports 200213, University of Groningen, Centre for Development Studies (CDS).
  10. Ozturk, I., 2007. "Foreign Direct Investment – Growht Nexus: A Review of The Recent Literature," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 4(2), pages 79-98.
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Citations

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Cited by:
  1. Don P. Clark & Jannett Highfill & Jonas de Oliveira Campino & Scheherazade S. Rehman, 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1.
  2. Kamel ABDELLAH ( GREThA, CNRS, UMR 5113 & ISG, UNIVERSITE DE TUNIS) & Dalila NICET-CHENAF (GREThA, CNRS, UMR 5113) & Eric ROUGIER (GREThA, CNRS, UMR 5113), 2012. "FDI and macroeconomic volatility: A close-up on the source countries," Cahiers du GREThA 2012-21, Groupe de Recherche en Economie Théorique et Appliquée.
  3. Muhammad, Shahbaz & mohammad, Mafizur Rahman, 2011. "The dynamic of financial development, imports, foreign direct investment and economic growth: cointegration and causality analysis in Pakistan," MPRA Paper 32181, University Library of Munich, Germany, revised 12 Jul 2011.

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