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The Effect of Foreign Direct Investment on Economic Growth

Author

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  • Sergey Kondyan

    (Nazarbayev University)

  • Karine Yenokyan

    (Johns Hopkins University)

Abstract

We develop a theoretical model that studies the effects of FDI on growth in the absence of channels through which the spillover effects of FDI operate. By isolating the effects of FDI, we examine how FDI affects growth through its primary function of capital accumulation. Untangling the growth effects of FDI operating through capital accumulation from the spillover effects of FDI can help explain the ambiguity in the empirical evidence on the subject. The transitional dynamics are characterized by the interdependence of the variables of the source and recipient countries. We study the dynamic system through the model calibration analysis.

Suggested Citation

  • Sergey Kondyan & Karine Yenokyan, 2019. "The Effect of Foreign Direct Investment on Economic Growth," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(4), pages 532-564, October.
    • Handle: RePEc:pal:easeco:v:45:y:2019:i:4:d:10.1057_s41302-019-00140-9
    DOI: 10.1057/s41302-019-00140-9
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    More about this item

    Keywords

    Foreign direct investment; Growth; Transitional dynamics;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • F15 - International Economics - - Trade - - - Economic Integration

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