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How Does FDI and Economic Growth Affect Each Other? The OECD Case

In: Proceedings of the Conference on Emerging Economic Issues in a Globalizing World

Author

Listed:
  • Burcu Türkcan

    (Izmir University of Economics)

  • Alper Duman

    (Izmir University of Economics)

  • I. Hakan Yetkiner

    (Izmir University of Economics)

Abstract

This paper tests the endogenous relationship between FDI and economic growth using a panel dataset for 23 OECD countries for the period 1975-2004. Following the literature, we treat economic growth and FDI as endogenous variables, and estimate a two-equation simultaneous equation system with the generalized methods of moments (GMM) for the OECD case. We find that FDI and growth are important determinants of for each other. We also find that export growth rate is statistically significant determinant of FDI and economic growth. Our results indicate that there is an endogenous relationship between FDI and economic growth.

Suggested Citation

  • Burcu Türkcan & Alper Duman & I. Hakan Yetkiner, 2008. "How Does FDI and Economic Growth Affect Each Other? The OECD Case," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Oguz Esen & Ayla Ogus (ed.), Proceedings of the Conference on Emerging Economic Issues in a Globalizing World, pages 21-40, Izmir University of Economics.
    • Handle: RePEc:izm:prcdng:200802
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    References listed on IDEAS

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    2. Sharil Sharma & Manpreet Kaur & Preeti Sharma & Sukhmani Sandhu, 2020. "A Study of Relationship and Impact of Foreign Direct Investment on Economic Growth Rate of India," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 327-330.
    3. Rosdiana Sijabat, 2023. "The Association between Foreign Investment and Gross Domestic Product in Ten ASEAN Countries," Economies, MDPI, vol. 11(7), pages 1-21, July.
    4. Md Kamal Hossain & Md Shamim Hossain, 2023. "Causal Interaction between Foreign Direct Investment Inflows and China’s Economic Growth," Sustainability, MDPI, vol. 15(10), pages 1-18, May.
    5. Faik Bilgili & Nadide S. Tülüce & Ibrahim Doğan & H. Hilal Bağlıtas, 2016. "The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts," Applied Economics, Taylor & Francis Journals, vol. 48(5), pages 345-360, January.
    6. Benzaim, Samia & Ftiti, Zied & Khedhaouria, Anis & Djermane, Rebai, 2023. "US foreign investments: Technology transfer, relative backwardness, and the productivity growth of host countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 275-295.
    7. Bilgehan Tekin, 2021. "Modeling the Relation of Financial Integration-Economic Growth with GMM and QR Methods," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 32-47.
    8. Yongliang Zhang & Md. Qamruzzaman & Salma Karim & Ishrat Jahan, 2021. "Nexus between Economic Policy Uncertainty and Renewable Energy Consumption in BRIC Nations: The Mediating Role of Foreign Direct Investment and Financial Development," Energies, MDPI, vol. 14(15), pages 1-29, August.
    9. Sandra Sookram & Roger Hosein & Leera Boodram & George Saridakis, 2022. "Determining Factors of FDI Flows to Selected Caribbean Countries," JRFM, MDPI, vol. 15(2), pages 1-13, January.
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