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Foreign direct investment, economic freedom and economic growth: International evidence

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  • Azman-Saini, W.N.W.
  • Baharumshah, Ahmad Zubaidi
  • Law, Siong Hook

Abstract

In this paper, we investigate the systemic link between economic freedom, foreign direct investment (FDI) and economic growth in a panel of 85 countries. Our empirical results, based on the generalized method-of-moment system estimator, reveal that FDI by itself has no direct (positive) effect on output growth. Instead, the effect of FDI is contingent on the level of economic freedom in the host countries. This means the countries promote greater freedom of economic activities gain significantly from the presence of multinational corporations (MNCs).

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 5 (September)
Pages: 1079-1089

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:5:p:1079-1089

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Foreign direct investment Economic freedom Economic growth Absorptive capacity Generalized method-of-moments R&D spillovers;

References

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Citations

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Cited by:
  1. Okada, Keisuke, 2013. "The interaction effects of financial openness and institutions on international capital flows," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 131-143.
  2. Anwar, Amar & Mughal, Mazhar, 2012. "Economic Freedom and Indian Outward Foreign Direct Investment: An Empirical Analysis," MPRA Paper 49610, University Library of Munich, Germany, revised 15 Oct 2012.
  3. Ivanovic, Zoran & Baresa, Suzana & Bogdan, Sinisa, 2011. "Influence Of Fdi On Tourism In Croatia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 2(1), pages 21-28.
  4. Siong Law & W. Azman-Saini, 2012. "Institutional quality, governance, and financial development," Economics of Governance, Springer, vol. 13(3), pages 217-236, September.
  5. Jinzhao Chen & Thérèse Quang, 2012. "International Financial Integration and Economic Growth: New Evidence on Threshold Effects," EconomiX Working Papers 2012-6, University of Paris West - Nanterre la Défense, EconomiX.
  6. Paresh Narayan & Seema Narayan & Russell Smyth, 2007. "Does Democracy Facilitate Economic Growth Or Does Economic Growth Facilitate Democracy? An Empirical Study Of Sub-Saharan Africa," Development Research Unit Working Paper Series 10-07, Monash University, Department of Economics.
  7. repec:hal:wpaper:halshs-00710139 is not listed on IDEAS
  8. Adegoke Ibrahim Adeleke, 2014. "Fdi-Growth Nexus In Africa: Does Governance Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(1), pages 111-135, March.
  9. Kešeljević, Aleksandar & Spruk, Rok, 2013. "Global distribution and dynamics of economic freedom: Non-parametric approach," Economic Modelling, Elsevier, vol. 33(C), pages 560-571.
  10. Feeny, Simon & Iamsiraroj, Sasi & McGillivray, Mark, 2014. "Growth and Foreign Direct Investment in the Pacific Island countries," Economic Modelling, Elsevier, vol. 37(C), pages 332-339.
  11. Kotera, Go & Okada, Keisuke & Samreth, Sovannroeun, 2012. "Government size, democracy, and corruption: An empirical investigation," Economic Modelling, Elsevier, vol. 29(6), pages 2340-2348.
  12. Webster, A.L., 2013. "Is There Feed-Back Between Economic Freedom and Economic Growth: A Comparative Granger-Causality Test Based On Quartiles," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 11-24.

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