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Revisiting the Effect of FDI on Economic Growth using Quantile Regression

Author

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  • Lijuan Huo

    (Beijing Institute of Technology)

  • Tae-Hwan Kim

    (Yonsei University)

  • Yunmi Kim

    (University of Seoul)

Abstract

Numerous empirical studies preset strong evidence supporting the positive relationship between Foreign Direct Investment (FDI) and the host countries¡¯ economic growth. Unlike most papers investigating this relationship using least squares-based regression, we analyze the effect of FDI on economic growth using quantile regression (QR). In this paper, we attempt to (i) reduce the omitted variable bias, (ii) solve the potential endogeneity problem of FDI, and (iii) allow heterogeneity across countries, using instrumental variable QR for panel data with fixed effect. Our empirical results reinforce the view that FDI is positively related to economic growth in under-developed countries where the rate of growth is relatively low.

Suggested Citation

  • Lijuan Huo & Tae-Hwan Kim & Yunmi Kim, 2015. "Revisiting the Effect of FDI on Economic Growth using Quantile Regression," Working papers 2015rwp-83, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2015rwp-83
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    References listed on IDEAS

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    7. Usha Nair‐Reichert & Diana Weinhold, 2001. "Causality Tests for Cross‐Country Panels: a New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-171, May.
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    Cited by:

    1. Ben-Salha Ousama & Zmami Mourad, 2020. "The impact of private capital flows on economic growth in the MENA region," Economics and Business Review, Sciendo, vol. 6(3), pages 45-67, August.

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    Keywords

    FDI; Quantile Regression; Panel Data; Endogeneity; Instrumental Variable;
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