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Impact of outward foreign direct investment: Evidence from Asia

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  • Sahoo, Pravakar
  • Bishnoi, Ashwani

Abstract

The study makes an attempt to contribute to the ongoing policy debate on whether OFDI has a complementary or substitution effect on domestic investment and hence, growth. For the purpose, the current paper uses panel data analysis to understand the impact of OFDI for 14 emerging economies in the period 1981–2019. We supplement the cross-country evidence with a time series analysis for India, given that FDI outflows from the country have been steadily increasing over the years. The results confirm the positive effect of OFDI on economic growth, but the substitution effect for domestic investment. This indicates that the OFDI positively affects growth through its effect on trade and other positive spillover effect, rather than domestic investment. However, in case of India, the findings support the complementary effect of OFDI on domestic investment.

Suggested Citation

  • Sahoo, Pravakar & Bishnoi, Ashwani, 2021. "Impact of outward foreign direct investment: Evidence from Asia," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1131-1148.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:5:p:1131-1148
    DOI: 10.1016/j.jpolmod.2021.06.004
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    More about this item

    Keywords

    OFDI; Growth; Domestic investment; Emerging countries; India;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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