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Determinants of, and the Relation Between, Foreign Direct Investment and Growth

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  • Ewe-Ghee Lim

Abstract

This paper summarizes recent arguments/findings on two aspects of foreign direct investment (FDI): its correlation with economic growth and its determinants. The first part focuses on recent literature regarding positive spillovers from FDI while the second deals with the determinants of FDI. The paper finds that while substantial support exists for positive spillovers from FDI, there is no consensus on causality. On determinants, the paper finds that market size, infrastructure quality, political/economic stability, and free trade zones are important for FDI, while results are mixed regarding the importance of fiscal incentives, the business/investment climate, labor costs, and openness.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/175.

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Length: 28
Date of creation: 01 Nov 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/175

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Keywords: Foreign direct investment; Economic growth; fdi; direct investment; foreign investment; foreign investors; investors; market size; host country; fdis; investment climate; technology transfer; foreign capital; host economy; direct foreign investment; joint ventures; multinational firms; domestic investment; tax incentives; corporate tax rates; corporate tax; foreign ownership; international investment; market access; export processing zones; industrial development; foreign affiliates; foreign technology; market failure; host developing countries; tax system; host investment climate; macroeconomic stability; manufacturing sector; host-country; multinational enterprises; investment decisions; manufacturing direct foreign investment; foreign investments; investment barriers; foreign investor; international trade; foreign trade; investment regime; import substitution; industrial economies; knowledge diffusion; foreign car; domestic fixed investment; direct foreign investments; multinational enterprise; foreign investment advisory service; investment location decisions; foreign market; expropriation; private foreign investment; fixed investment; local capital markets; foreign markets; investment restrictions; economic zones; capacity utilization; investment decision; special economic zones; manufacturing direct foreign investments; intangible assets;

References

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