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Causality among Foreign Direct Investment and Economic Growth: A Directed Acyclic Graph Approach

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  • Li, Yarui
  • Woodard, Joshua D.
  • Leatham, David J.

Abstract

With the aim of examining the causal structure between foreign direct investment (FDI) and economic growth, this study derives inductive causal inference using the directed acyclic graph approach, which makes no a priori causal assumptions. There are three major findings of this study. First, economic growth causes FDI inflows for developing countries, whereas FDI induces economic growth for developed countries. Second, trade is an important intermediary to facilitate the interaction between FDI and other factors. Third, the stock market is found to be an intermediary that amplifies the influence on FDI from many causal variables of FDI for developed countries.

Suggested Citation

  • Li, Yarui & Woodard, Joshua D. & Leatham, David J., 2013. "Causality among Foreign Direct Investment and Economic Growth: A Directed Acyclic Graph Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(04), November.
  • Handle: RePEc:ags:joaaec:157392
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    Cited by:

    1. Miljkovic, Dragan & Dalbec, Nathan & Zhang, Lei, 2016. "Estimating dynamics of US demand for major fossil fuels," Energy Economics, Elsevier, vol. 55(C), pages 284-291.
    2. repec:ejn:ejefjr:v:5:y:2017:i:2:p:1-16 is not listed on IDEAS

    More about this item

    Keywords

    causality; economic growth; DAG; FDI; International Relations/Trade; F21;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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