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Endogenous Determination of FDI Growth and Economic Growth:The OECD Case

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Author Info
Burcu Türkcan () (Department of Economics, Izmir University of Economics)
I. Hakan Yetkiner () (Department of Economics, Izmir University of Economics)

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Abstract

This paper tests the endogenous relationship between FDI growth and economic growth using a panel dataset for 23 OECD countries for the period 1975-2004. In particular we estimate a two-equation simultaneous equation system with the generalized methods of moments (GMM) that treats economic growth and FDI growth as endogenous variables. We find that FDI growth and economic growth are significant determinants of each other. We also find that export growth rate and human capital are statistically significant determinants of both FDI growth and economic growth. Our findings lead us to conclude that FDI growth and economic growth have an endogenous relationship.

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Publisher Info
Paper provided by Izmir University of Economics in its series Working Papers with number 0807.

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Length: 23 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:izm:wpaper:0807

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Web page: http://eco.ieu.edu.tr
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Related research
Keywords: FDI growth; economic growth; Panel Data; GMM;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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  7. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April. [Downloadable!] (restricted)
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  11. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September. [Downloadable!] (restricted)
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  18. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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