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

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

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    File URL: http://purl.umn.edu/157392
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    Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

    Volume (Year): 45 (2013)
    Issue (Month): 04 (November)
    Pages:

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    Handle: RePEc:ags:joaaec:157392
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    11. Brecher, Richard A., 1983. "Second-best policy for international trade and investment," Journal of International Economics, Elsevier, vol. 14(3-4), pages 313-320, May.
    12. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer, vol. 22(1), pages 67-84, February.
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