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The Impact of FDI, Cross Border Mergers and Acquisitions and Greenfield Investments on Economic Growth

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  • Paula Neto

    ()
    (ISCA, Universidade de Aveiro)

  • António Brandão

    (Faculdade de Economia, Universidade do Porto)

  • António Cerqueira

    ()
    (Faculdade de Economia, Universidade do Porto)

Abstract

This paper investigates whether aggregate foreign direct investment (FDI), cross border mergers and acquisitions (M&A) and greenfield investments affects economic growth based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. We can also conclude that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Oppositely, M&A has a negative effect on the economic growth of developing countries, but insignificant on developed countries.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 291.

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Length: 28 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:por:fepwps:291

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Keywords: Foreign Direct Investment; Cross Border Mergers and Acquisitions; Greenfield Investments; Economic Growth;

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