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Estimating Relationships Among FDI Inflow, Domestic Capital, and Economic Growth Using the Threshold Error Correction Approach

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  • Shu-Chen Chang

Abstract

This paper investigates both long- and short-term relationships among foreign direct investment (FDI), domestic capital, and economic growth in Taiwan using the threshold error-correction approach. The results show a long-term equilibrium relationship among the three variables, which remains stable with asymmetric adjustments. Three short-term relationships are found: (1) promoting growth may stimulate domestic capital accumulation; (2) increasing FDI inflow may stimulate investment from domestic sources rather than crowd out the formation of capital; and (3) FDI inflows directly influence growth through stimulating domestic investment.

Suggested Citation

  • Shu-Chen Chang, 2010. "Estimating Relationships Among FDI Inflow, Domestic Capital, and Economic Growth Using the Threshold Error Correction Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(1), pages 6-15, January.
    • Handle: RePEc:mes:emfitr:v:46:y:2010:i:1:p:6-15
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    Citations

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    Cited by:

    1. Sabina Silajdzic & Eldin Mehic, 2016. "Absorptive Capabilities, FDI, and Economic Growth in Transition Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(4), pages 904-922, April.
    2. Najid Ahmad & Mouna Hdia & Hong-Zhou Li & Jianlin Wang & Xian-Liang Tian, 2018. "Foreign Investment, Domestic Investment and Economic Growth in China: Does Foreign Investment Crowd in or Crowd out Domestic Investment?," Economics Bulletin, AccessEcon, vol. 38(3), pages 1279-1291.
    3. Magazzino, Cosimo & Mele, Marco, 2022. "Can a change in FDI accelerate GDP growth? Time-series and ANNs evidence on Malta," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    4. Ceyhun Haydaroglu, 2016. "The Effect of Foreign Direct Investment and Economic Freedom on Economic Growth: The Case of BRICS Countries," Research in World Economy, Research in World Economy, Sciedu Press, vol. 7(1), pages 1-10, June.
    5. Lei, Ming & Yin, Zihan & Yu, Xiaowen & Deng, Shijie, 2017. "Carbon-weighted economic development performance and driving force analysis: Evidence from China," Energy Policy, Elsevier, vol. 111(C), pages 179-192.
    6. Zhexuan Qin & Ilhan Ozturk, 2021. "Renewable and Non-Renewable Energy Consumption in BRICS: Assessing the Dynamic Linkage between Foreign Capital Inflows and Energy Consumption," Energies, MDPI, vol. 14(10), pages 1-17, May.
    7. Surya Chelikani & Frank P. D'Souza, 2014. "The Effect of Regulation Fair Disclosure on Market Integration," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(4), pages 43-62.
    8. Doojin Ryu, 2013. "Spread and depth adjustment process: an analysis of high-quality microstructure data," Applied Economics Letters, Taylor & Francis Journals, vol. 20(16), pages 1506-1510, November.
    9. Chinmaya Behera & Bikash Ranjan Mishra & Biswashree Tanaya Priyadarsini & Lopamudra D. Satpathy, 2020. "Institutional Quality and Foreign Direct Investment Inflows: Evidence from Cross-country Data with Policy Implication," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 302-316.
    10. Doojin Ryu, 2012. "The effectiveness of the order-splitting strategy: an analysis of unique data," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 541-549, April.
    11. Fadi Fawaz & Eric Frey & Deborah Piscitiello, 2019. "The effects of HIV mortality on saving and investment in Asia," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(1), pages 1-15, January.
    12. Hyeyoen Kim & Doojin Ryu, 2012. "Which trader's order-splitting strategy is effective? The case of an index options market," Applied Economics Letters, Taylor & Francis Journals, vol. 19(17), pages 1683-1692.
    13. E. Tsanana & X. Chapsa & C. Katrakilidis, 2016. "Is growth corrupted or bureaucratic? Panel evidence from the enlarged EU," Applied Economics, Taylor & Francis Journals, vol. 48(33), pages 3131-3147, July.

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