Revisiting the FDI-led growth Hypothesis: The case of China
AbstractWe employ simulation based inference to investigate the causal relationship between foreign direct investment and gross domestic product in China for the 1982–2008 period, both in a bivariate and a multivariate framework. Our maximum entropy bootstrap based approach, which avoids pre-test biases while also being less affected from the size distortion problem, shows that a statistically significant relationship between FDI and GDP growth does not exist. We also explore whether this result is driven by the level of financial development and we find that there is no evidence of a change in the noncausal relationship due to this contingency effect. Our results indicate that FDI does not necessarily lead to higher economic growth at the aggregate level and suggest the need for undertaking disaggregated analyses using industrial and provincial level data for the formulation of effective macroeconomic policies concerning the flows of FDI.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 31 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/30411
FDI; Economic growth; China; Bootstrap;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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