Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002

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Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002

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Sarkar, Prabirjit

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Prabirjit Sarkar Dr

Abstract

The present study casts some doubt on the growth-promoting effect of foreign direct investment (FDI), which is widely supported by the proponents of financial globalization. The panel data analysis of 51 less developed countries shows a rising relationship between growth and FDI (relative to gross capital formation) only for the group of 11 relatively rich and open-economy countries. The time-series analysis observes meaningful positive relationships between FDI and growth only for 3 countries belonging to this group and some other countries. But by and large no long-term positive relationship exists between the two irrespective of income levels, openness and FDI-dependence.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5176.

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Date of creation: Oct 2007
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Handle: RePEc:pra:mprapa:5176

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Find related papers by JEL classification:
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
F50 - International Economics - - International Relations and International Political Economy - - - General
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-10-13 (All new papers)
NEP-CWA-2007-10-13 (Central & Western Asia)
NEP-FDG-2007-10-13 (Financial Development & Growth)

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